Feb 02, 2016

Court of Appeals #9

The Court of Appeals finished 2015, and the Lippman era as Chief Judge, deciding an assortment of legal questions.  The Court addressed contract law involving choice of law provisions; arbitration clauses; and contractual indemnification.  In the tort law arena, the Court considered a legal malpractice claim; expanded the scope of potential plaintiffs for a healthcare providers duty to warn its patient; and clarified the meaning of trivial in sidewalk and staircase slip-and-fall cases.  In other cases, the Court adjudicated when an individual has standing to challenge local government action; examined the requirements for a whistleblower recovery; and considered custody issues involving grandparents.

Does the inclusion of a New York choice-of-law provision in a contract demonstrate the parties’ intent that courts not conduct a conflict-of-law analysis?  Answer:  Yes.

Ministers & Missionaries Benefit Bd. v. Snow, 2015 NY Slip Op 09186 (decided on December 15, 2015)

The Court of Appeals began with the observation that:

In IRB-Brasil Resseguros, S.A. v Inepar Invs., S.A. [2012], this Court held that, where parties include a New York choice-of-law clause in a contract, such a provision demonstrates the parties’ intent that courts not conduct a conflict-of-laws analysis…We now extend that holding to contracts that do not fall under General Obligations Law § 5-1401, and clarify that this rule obviates the application of both common-law conflict-of-laws principles and statutory choice-of-law directives, unless the parties expressly indicate otherwise.

Plaintiff, a New York not-for-profit corporation, administers a retirement plan and a death benefit plan for ministers and missionaries. Decedent Clark Flesher was a minister enrolled in both plans. He named his then-wife, defendant LeAnn Snow, as his primary beneficiary and her father, defendant Leon Snow, as the contingent beneficiary. Both plans state that are governed by and construed in accordance with the laws of the State of New York.

After he and LeAnn Snow divorced, Flesher moved to Colorado and died there. His will, naming his sister, Michele Arnoldy, as personal representative of the estate, was admitted to probate in Colorado. Flesher never changed his beneficiary designations under the plans. Because the plan was unsure to whom the plan benefits should be paid after Flesher’s death under the law of either state, Ms. Snow could not receive the benefit.

The conflict involved whether or not Lee Ann’s father was the proper recipient. Under Colorado law the answer was no. New York law would allow him to receive the benefits. The plan commenced a federal interpleader action against Flesher’s Estate, [the personal representative of the Estate], LeAnn Snow and Leon Snow.

Southern District of New York (Forrest, J.) directed the plan to pay the disputed funds to Arnoldy, as representative of the Estate.

The Second Circuit Court of Appeals, however determined that there were important and unanswered questions of New York law and, therefore, certified two questions to the Court of Appeals before deciding the appeal.

“(1) Whether a governing-law provision that states that the contract will be governed by and construed in accordance with the laws of the State of New York, in a contract not consummated pursuant to New York General Obligations Law section 5-1401, requires the application of New York Estates, Powers & Trusts Law section 3-5.1 (b) (2), a New York statute that may, in turn, require application of the law of another state?

(2) If so, whether a person’s entitlement to proceeds under a death benefit or retirement plan, paid upon the death of the person making the designation, constitutes ‘personal property . . . not disposed of by will’ within the meaning of New York Estates, Powers & Trusts Law section 3-5.1 (b) (2)?”

The Court noted that “The first certified question essentially asks us how to interpret the phrase ‘laws of . . .New York’ in those contractual provisions.”

The Court of Appeals held:

Our conclusion in the IRB case — that when parties include a choice-of-law provision in a contract, they intend application of only that state’s “substantive law”…is equally applicable to the contracts now before us. If New York’s common-law conflict-of-laws principles should not apply when the parties have chosen New York law to govern their dispute — a point on which all parties to this appeal agree — and EPTL 3-5.1 (b) (2) simply represents a common-law conflicts principle that has been codified into statute, that provision should not be considered in resolving this dispute.

Stated differently, New York courts should not engage in any conflicts analysis where the parties include a choice-of-law provision in their contract, even if the contract is one that does not fall within General Obligations Law § 5-1401. That provision applies only to contracts for transactions involving an aggregate of over $250,000, but it specifically states that “[n]othing contained [herein] shall be construed to limit or deny the enforcement of any provision respecting choice of law in any other contract”…While IRB does not entirely answer the current question because that case does not address the applicability of a statutory choice-of-law directive, logic dictates that, by including a choice-of-law provision in their contracts, the parties intended for only New York substantive law to apply…A contrary interpretation is conceivable. However, we should apply the most reasonable interpretation of the contract language that effectuates the parties’ intended and expressed choice of law…To do otherwise — by applying New York’s statutory conflict-of-laws principles, even if doing so results in the application of the substantive law of another state — would contravene the primary purpose of including a choice-of-law provision in a contract — namely, to avoid a conflict-of-laws analysis and its associated time and expense. Such an interpretation would also interfere with, and ignore, the parties’ intent, contrary to the basic tenets of contract interpretation.

Moreover, allowing the application of a statutory choice-of-law directive would mean that the contracts here could be interpreted differently for each plan member, depending on where the member was domiciled at the time of his or her death. It seems unlikely that MMBB intended to have its contracts — a retirement plan and a death benefit plan — interpreted in many different ways based on the whim and movements of its plan members. The intention to provide for predictable results regarding the distribution of funds to beneficiaries is particularly apt for these plans, which are issued to ministers and missionaries, who presumably are more likely than the general population to move often and who may live in all parts of the world, not just in different states. Contractually planning for the application of New York substantive law regarding benefit distribution would provide stability, certainty, predictability and convenience…, so that MMBB could easily determine who should receive plan benefits.

Conversely, if application of the statutory choice-of-law provision — EPTL 3-5.1 (b) (2) — was required, it would be necessary for MMBB to keep abreast of the laws of all other states and nations to ensure that it paid the proper beneficiaries, which would invite the very uncertainties that MMBB and the plan members presumably intended to avoid. While it might appear to be a simple task to determine a decedent’s domicile at the time of his or her death, that will not always be the case. Therefore, we hold that, when parties include a choice-of-law provision in a contract, they intend that the law of the chosen state — and no other state — will be applied. In such a situation, the chosen state’s substantive law — but not its common-law conflict-of-laws principles or statutory choice-of-law directives — is to be applied, unless the parties expressly indicate otherwise.

Was the Federal Arbitration Act applicable to the dispute and, if so, did the plaintiffs waive their right to arbitrate by pursuing litigation?  Answer:  The FAA did apply to the dispute; however, the plaintiffs waived their right to arbitration.

Cusimano v. Schnurr, 2015 NY Slip Op 09232 (decided on December 16, 2015)

In his last civil case opinion on the Court, Chief Judge Lippman addressed the Federal Arbitration Act and waiver of the right to arbitrate.

The appeal involved commercial agreements entered into among family members (New York residents) regarding family-owned entities. Each agreement contained an arbitration clause.

The first agreement covered a family limited partnership (FLIP) that was formed to own, acquire and develop real property in New York, but now owned property in Florida that it leased to a CVS drug store.

The second agreement related to a limited liability company owned by sisters with its principal place of business is in Port Washington, New York.  The company indirectly owned an interest in a Marriott hotel in Plainview, New York.

Also at issue was a third agreement by which one sister sold her interest in one of the “Seaview Corporations,” — 60 Seaview — to her sister. The Seaview Corporations were formed by the sisters and their father, and own two commercial buildings in Port Washington, New York.

The action that ended in the Court of Appeals was commenced in New York County in August 2011 and alleged fraud and malpractice against the family’s accountants for work they had performed between 1991 and 2009, including allegations that they had aided and abetted fraud of father and sister who were not named as defendants. Before defendants responded to the complaint, plaintiffs moved to disqualify defendants’ counsel. Plaintiffs also served three nonparty subpoenas.  During oral argument on the motion to disqualify, defense counsel maintained that the matter “belongs in arbitration.”

Defendants successfully moved to dismiss the complaint on several grounds, including that the claims were time-barred. Supreme Court gave plaintiffs leave to replead certain causes of action with specificity. The court made clear that it viewed many of the claims as time-barred.  The plaintiffs demanded arbitration with identical allegations, except that two other family members were included as respondents.

Plaintiffs then moved to dismiss or stay the action they had commenced.  Defendant accountants cross-moved to dismiss the action with prejudice or, in the alternative, to permanently stay the claims asserted in the arbitration demand as time-barred. Father and sister moved to intervene and for a permanent stay of the arbitration claims, as time-barred.

Supreme Court held that the FAA did not apply.  The Court dismissed and enjoined arbitration of the time-barred claims and compelled the parties to arbitrate plaintiffs’ timely claims.

The Appellate Division reversed and held that the FAA did apply.  The Appellate Division also held that plaintiffs had not waived their right to arbitrate.  The Court of Appeals granted leave to appeal.

As to the FAA, Chief Judge Lippman stated:

The FAA provides that “[a] written provision in…a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction…shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”…The United States Supreme Court has interpreted the reach of the FAA extremely broadly, characterizing the Act’s basic purpose as “overcom[ing] courts’ refusals to enforce agreements to arbitrate”…In Allied-Bruce, the Supreme Court held that the term “involving commerce” was meant to be the functional equivalent of “affecting commerce,” which typically signals Congress’s intent to invoke the full extent of its powers under the Commerce Clause[.]

In particular, the Court addressed the scope of the statutory language, “evidencing a transaction involving commerce.” The Court observed that there were conflicting interpretations of the phrase — whether it meant that the parties had contemplated substantial interstate activity at the time they had entered the agreement, or whether the transaction at issue must have turned out, in fact, to have involved interstate commerce…The Court concluded that the “commerce in fact” interpretation was more in keeping with the statute, pointing out that the “contemplation of the parties” test appeared contrary to congressional intent, as it would invite litigation about what the parties had been thinking when they executed the agreement…“[W]e accept the ‘commerce in fact’ interpretation, reading the Act’s language as insisting that the ‘transaction’ in fact ‘involve’ interstate commerce, even if the parties did not contemplate an interstate commerce connection”[.].

More recently, the United States Supreme Court indicated that it was “perfectly clear that the FAA encompasses a wider range of transactions than those actually ‘in commerce’ — that is, ‘within the flow of interstate commerce’”…The Court clarified that it is not necessary for the individual transaction to have a substantial effect on interstate commerce, so long as the type of activity at issue has the requisite substantial effect…“Congress’s Commerce Clause power ‘may be exercised in individual cases without showing any specific effect upon interstate commerce’ if in the aggregate the economic activity in question would represent ‘a general practice . . . subject to federal control.’ Only that general practice need bear on interstate commerce in a substantial way”[.]

The Court concluded:

Here, the Berita and FLIP agreements concern ownership of and investment in commercial properties. Indeed, Berita leases its property to an international hotel chain and the FLIP owns property out-of-state that it leases to a national drug store chain. This activity, in the aggregate, plainly bears on interstate commerce. While the question is closer as to 60 Seaview Corp., that agreement likewise concerns commercial real estate and has the requisite substantial effect on interstate commerce.  Although certain courts have determined that single residential real estate transactions are intrastate in nature…matters concerning commercial real estate have been treated as implicating interstate commerce…Under these circumstances, we conclude that the FAA is applicable to these agreements.

Although this interpretation is undeniably broad, the Supreme Court has made it abundantly clear that the FAA’s reach is expansive. The idea that the intrafamilial nature of the agreements has some bearing on whether the FAA is applicable finds no support in the caselaw. Nor does the fact that these agreements do not themselves evidence the commercial transactions appear to be significant. The ultimate purpose of the agreements was to authorize participation in the business of commercial real estate and that is, in fact, what the entities did. In determining whether the FAA applies, the emphasis is meant to be on whether the particular economic activity at issue affects interstate commerce — and, here, it does.

Even though, under the FAA, “any doubts concerning whether there has been a waiver are resolved in favor of arbitration”, plaintiffs were found to have waived arbitration.  The Court noted:

Here, both (substantive and procedural) prejudice have likewise been established. After vigorously pursuing their litigation strategy for approximately one year, plaintiffs moved to compel arbitration. Even more telling, the desire for arbitration only arose after Supreme Court made plain its view that plaintiffs’ claims were vexatious and largely time-barred. Indeed, plaintiffs had expressly represented to Supreme Court that they did not want to go to arbitration. Plaintiffs’ behavior is indicative of blatant forum-shopping and, under these circumstances, prejudice has clearly been established. Therefore, plaintiffs have waived the right to arbitration and the issue of timeliness should be determined by the court.

Did a regulator’s notice that the recipient was a potentially responsible party for a site’s environmental contamination trigger a provision for contractual indemnification?  Answer:  yes.

Remet Corp. v. Estate of Pyne, 2015 NY Slip Op 07575 (decided on October 20, 2015)

The Department of Environmental Conservation (“DEC”) notified Remet Corp. (“Remet”) that Remet was a potentially responsible party for a site’s environmental contamination.

The question presented to the Court of Appeals was whether the DEC notice triggered Remet’s claim for contractual indemnification.

The Court of Appeals outlined the background:

Decedent James R. Pyne was the founder and sole stockholder of Remet Corporation, a company that manufactures products for use in the investment casting industry. In a Purchase and Sale Agreement entered into in March 1999, Pyne sold to Burmah Castro Holding, Inc. all of Remet’s stock and facilities, along with real property that he had been leasing to Remet. Because one of the parcels of real property abutted the Erie Canal Site in Utica, which had been listed as an Inactive Hazardous Waste Site, the sales agreement contained an indemnification provision. In relevant part, that provision obligated Pyne to “indemnify, defend and hold [the] [b]uyer…harmless” for “Environmental Losses”:

“that arise out of or relate to . . . any environmental remedial, investigatory or monitoring action taken or any other Losses under or relating to any Environmental Law with respect to any of the Company’s Real Properties or the Company’s assets or operations (past or present), as a result of conditions which exist (or previously existed) on or prior to the Closing Date, provided that Losses under this Section . . . shall only be indemnified by Seller if such Losses arise out of or result from actions by any Indemnified Party that such Indemnified Party is required to take under or in connection with any Environmental Law . . . (and such Loss shall not arise out of or result from communications by such Indemnified Party with any Governmental Entity [except to the extent required under any Environmental Law])”.

By its terms, the indemnification obligation was to remain in effect for 10 years and “claims for indemnification asserted prior to the end of such period…[would] survive until final resolution thereof.” Pyne also entered into an Environmental Escrow Agreement pursuant to which he deposited $2.7 million into an escrow account to fund payments arising from his indemnification obligation for environmental losses under the sales agreement. Remet’s current management team ultimately acquired all of Remet’s stock and the indemnification rights under the sales agreement.

The Court observed the following about the DEC notice:

In October 2002, Remet received a letter from DEC that is at the heart of this dispute. Labeled “NOTICE LETTER URGENT LEGAL MATTER – PROMPT REPLY NECESSARY,” the letter informed Remet that DEC had documented a release of “hazardous substances”…and the presence of “hazardous wastes”…at the Erie Canal Site adjacent to Remet’s real property. The letter further stated that “[r]esponsible parties are liable for monies expended by the State in taking response actions” and that DEC had determined that Remet was “a potentially responsible party [PRP] for the site’s contamination.” In the letter, DEC requested that Remet implement and finance a remedial program for the site, to be memorialized in a consent order. DEC advised that, “if a signed Consent Order [was] not received within 30 days . . ., all further discussions [would] terminate,” and DEC would perform the necessary work itself and then seek recovery from Remet, as a PRP. In that event, the PRP letter “serve[d] as a demand for payment of all monies [DEC] may expend,” with interest accruing from the date of the letter.

The parties responded to the notice as follows:

Remet did not sign a consent order within the required time period, but began investigating DEC’s claims and gave notice to Pyne that it was asserting an indemnification claim under the sales agreement. Although Pyne did not assume defense of the claim, his attorneys contacted DEC and cooperated with Remet in undertaking investigative efforts with respect to the Erie Canal Site. Pyne died in March 2003. Because none of the PRPs identified by DEC agreed to undertake remediation of the site, DEC determined that it would address the site’s contamination with State funds and seek recovery from the PRPs, ultimately adopting a $12.5 million decontamination plan. Remet filed notices of claim against Pyne’s estate seeking indemnification for environmental liabilities under the sales agreement, including approximately $550,000 in costs already incurred by Remet. After the Estate objected to a release of funds from the escrow account and insisted that Remet refrain from dealing with DEC directly regarding Remet’s potential liability for remediation of the site, Remet commenced this action, asserting claims for contractual and common-law indemnification.

The Supreme Court granted Remet summary judgment on liability and declared that Remet was entitled to indemnification for past and future environmental losses arising out of DEC’s investigation and remediation of the Erie Canal Site.

The Appellate Division unanimously reversed and awarded summary judgment to defendants because “DEC’s letter merely informed…[Remet] of [its] potential liability and sought voluntary action on [its] part…[the letter] did not require [Remet] to take action.”

The Court of Appeals also noted that “Pyne, the actual signatory to the sales agreement, viewed the PRP letter as requiring action” based on the fact that he had his attorneys cooperate with the DEC and he deposited a large sum in escrow to cover potential expenses arising from it.

As a result, the Court of Appeals reversed the Appellate Division concluding that:

In short, the PRP letter issued to Remet was sufficiently coercive and adversarial as to “require” action “under or in connection with any Environmental Law” pursuant to the sales agreement, given that it threatened litigation and imminent adverse legal and financial consequences pursuant to the ECL…Moreover, inasmuch as Remet asserted its claims within 10 years of the closing date of the sales agreement, those claims “shall survive until final resolution thereof.” Accordingly, based on the particular language of the PRP letter and the indemnification clause at issue here, Remet is entitled to contractual indemnification for past and future environmental losses incurred as a result of DEC’s investigation and remediation of the Erie Canal Site, and Supreme Court properly granted summary judgment to plaintiff on liability[.]

Did a triable issues of fact exist with respect to a legal malpractice claims based upon (i) the allegation that counsel failed to properly advise and (ii) the alleged failure of counsel to perform the requisite due diligence in a mortgage securitization action?  Answer:  No as to the failure to advise claim, based on undisputed evidence; and no as to the due diligence claim, where a sophisticated party did not retain counsel to perform due diligence.

Nomura Asset Capital Corp. v. Cadwalader, Wickersham & Taft LLP, 2015 NY Slip Op 07693 (decided on October 22, 2015)

This case arrived in the Court of Appeals by way of an order of the Appellate Division granting both parties motion for leave to appeal.  The Court summarized the facts as follows:

[P]laintiffs, Nomura Asset Capital Corporation and Asset Securitization Corporation (Nomura), and defendant, the law firm of Cadwalader, Wickersham & Taft, LLP (Cadwalader), were working in the mortgage securitization field. In this industry, an investment bank sources and funds mortgages on properties with the objective of aggregating the mortgages into securitization pools. The loans are then sold to a trust, which issues securities in the form of certificates to investors. The certificates entitle the holders to a portion of the revenue stream produced by payments made by the mortgage borrowers.

Nomura established a commercial mortgage-backed securities business, and engaged Cadwalader to advise and confirm that Nomura’s securitized commercial mortgage loans qualified as real estate mortgage investment conduit (REMIC) trusts. Over the course of several years, Cadwalader’s work on Nomura REMIC securitizations garnered immense profits for Nomura and significant legal fees for Cadwalader. However, the professional relationship soured when a 1997 REMIC securitization, known as the Series 1997-D5 securitization (D5 securitization), embroiled Nomura in federal litigation and demands for a buy-back of a defaulted loan. In an attempt to recoup its losses associated with the federal lawsuit, Nomura commenced the underlying legal malpractice action against Cadwalader, alleging that Cadwalader failed to provide appropriate legal advice and perform necessary due diligence concerning the REMIC eligibility of the D5 securitization.

The dispute arose from a $50 million loan secured by the Doctor’s Hospital of Hyde Park:

In order to be REMIC-qualified and in compliance with the warranties set forth in the Pooling Service Agreement (PSA) and Mortgage Loan Purchase and Sale Agreement (MLPSA), the real property value for the hospital had to be appraised at a minimum of $40 million. Nomura’s appraiser estimated the hospital property’s market value at $68 million, based on a valuation of $3 million for the land, $27,960,000 for improvements, $9,640,000 for equipment, and $27,400,000 for intangibles. Although not set forth in the appraisal, a property valued at $68 million with a $50 million mortgage has an LTV of 73%, and therefore appears to be REMIC-qualified.

*     *     *


However, not all types of equipment qualify for REMIC purposes.  The appraisal did not provide detail sufficient to “provide a reasonable basis for determining REMIC qualification. Although the land, building, and improvements, valued by the appraiser at $30,960,000, would count under the REMIC standards, they failed to meet the $40 million minimum required under the 80% test. Nevertheless, Nomura relied on this appraisal, as written.”

The undisputed facts:

[P]rior to the closing on the D5 securitization, Nomura did not provide, Cadwalader did not request, and no one at Cadwalader ever reviewed or even saw the actual appraisal for the hospital, or, for that matter, for any other D5 securitization mortgage loan. Nomura did fax to an associate at Cadwalader, approximately 24 days before the D5 closing, a freestanding asset description report prepared by Nomura’s bankers for credit purposes, titled “Doctor’s Hospital of Hyde Park Deal Highlights” (highlights document). The highlights document stated that the $50 million loan was secured by “the land, building, and operations of the property” and that the collateral was the hospital’s “land, building and property management (operations).” It set forth an LTV at 73.5%. It also listed the appraiser’s reconciled valuation of $68 million, as well as the three valuation approaches.

In preparation for the closing, Cadwalader provided an opinion letter to Nomura stating that the D5 Series was REMIC-qualified. Cadwalader stated that its legal conclusion was based on the information contained in the[Pooling Service Agreement (“PSA”) and Mortgage Loan Purchase and Sale Agreement (“MLPSA”)], Prospectus, and two supplements. The letter also specifically stated that “as to any facts material to such opinions not known to” Cadwalader, it relied on “statements, certificates and representations” of Nomura officers and representatives. There was no mention of the highlights document.

Cadwalader also drafted the D5 securitization’s PSA and MLPSA. The PSA and the MLPSA stated specifically that Nomura warranted that each mortgage loan is a “qualified mortgage” within the meaning of the [Internal Revenue] Code, and that the loans in the trust were secured by mortgages on real property with a fair market value of at least 80% of the principal amount of the loan, as measured at the origination or closing date. In other words, that the mortgage loans in the D5 securitization complied with the 80% test.

The hospital went bankrupt and defaulted on its loan.  The trustee commenced a federal action against Nomura for breach of the PSA and MLPSA.  Prior to trial, Nomura settled the federal action for $67.5 million.

Nomura then sued Cadwalader for legal malpractice to recoup the settlement costs.  Nomura asserted that “Cadwalader committed malpractice because it failed to advise Nomura that the D5 appraisals had to separately value real property, as defined in the REMIC regulations, and, furthermore, that Cadwalader failed to perform the necessary due diligence to confirm that the D5 securitization was REMIC-qualified before issuing its pre-closing opinion letter.”

Cadwalader unsuccessfully moved for summary judgment and took an interlocutory appeal.  The decision and dissent in the Appellate Division:

The Appellate Division, in a 3-1 decision, modified the order of Supreme Court by dismissing the advice claim, and otherwise affirmed, but limited the due diligence claim to a factual issue related to the highlights document…The court concluded that Cadwalader had met its prima facie burden on the advice claim, based on the testimony of two Cadwalader partners and Nomura representatives, which demonstrated that Cadwalader provided Nomura with the advice on REMIC qualification, and that Nomura failed to establish a triable issue of fact on this claim. Regarding the due diligence claim, the court concluded that Cadwalader had no generalized duty to review all of the appraisals in the D5 securitization, but that triable issues of fact existed as to whether the highlights document contained warning signs that the hospital loan may not have been REMIC-qualified, requiring further inquiry by Cadwalader. The court also rejected Cadwalader’s argument that Nomura could not establish proximate cause.

The dissent agreed with the court’s analysis of the advice claim, but would have held that the due diligence claim was similarly without merit, and, therefore, Nomura’s malpractice cause of action should be dismissed in its entirety. The dissent would have found that the highlights document failed to demonstrate that the hospital loan was “more likely to be inappropriate…for inclusion in the securitization than any of the other loans”…simply because the face of the document revealed appraised values exceeding the REMIC threshold…The dissent reasoned that had Cadwalader been required to further inquire based on the highlights document it would have had to “conduct due diligence for which its highly sophisticated investment-banking client had deliberately declined to engage it”[.]

The Court of Appeals explained Plaintiff’s burden of proof:

To sustain its cause of action for legal malpractice, Nomura must “establish that [Cadwalader] failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages”[.]  An attorney’s conduct or inaction is the proximate cause of a plaintiff’s damages if “but for” the attorney’s negligence “the plaintiff would have succeeded on the merits of the underlying action”…or would not have sustained “actual and ascertainable” damages[.]  Thus, in order for Cadwalader to prevail on its summary judgment motion, it must establish that it provided the advice, and conducted the due diligence expected of counsel “exercis[ing] the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession”…If Cadwalader fell short of this professional standard, it must demonstrate that its conduct was not the proximate cause of Nomura’s damages.

The Court first affirmed the Appellate Division’s holding that an “alleged credibility issue is speculative and unsupported by any evidence, and thus cannot be the basis for denying summary judgment.”  As to the failure to advise claim, the Court also held that “the Appellate Division properly concluded, [Nomura’s evidence] amounts to a showing that some Nomura employees did not understand REMIC principles, not that Cadwalader failed to provide appropriate legal advice, or that Cadwalader refused to answer Nomura’s questions about REMIC qualification.”

Perhaps most significant, however, was the Court’s ruling concerning the due diligence claim:

Essentially Nomura seeks to have us ignore the fact that it assumed the responsibility for ensuring that the loans complied with the 80% test based on independent appraisals that Cadwalader did not conduct or review. However, we cannot ignore that Nomura chose to run its business in this way, and that Cadwalader acted upon and relied on that business model in its representation of Nomura.

Cadwalader, thus, met its burden to establish that it conducted the requisite due diligence, and that it “exercise[d] the ordinary and reasonable skill and knowledge commonly possessed by a member of the legal profession” when it relied on Nomura’s representations in issuing an opinion that the D5 securitization was REMIC-qualified…In contrast, Nomura failed to meet its burden to establish the existence of a triable issue of fact.

Did a hospital owe a duty of care to plaintiff (the operator of a bus struck by a discharged patient) such that the hospital was required to warn the patient at the time of her release that the medication given to her impaired her ability to safely operate a motor vehicle after leaving the hospital?  Answer:  Yes.

Davis v. South Nassau Communities Hosp., 2015 NY Slip Op 09229 (decided on December 16, 2015)

The Court of Appeals outlined the facts:

This action arises from a motor vehicle accident that occurred after nonparty Lorraine A. Walsh was treated at defendant South Nassau Communities Hospital (Hospital) by defendants Regina E. Hammock, D.O. and Christine DeLuca, RPA-C, that is, medical professionals employed by defendant Island Medical Physicians, P.C. (collectively, Island Medical defendants). As a part of that treatment, defendants intravenously administered to Walsh an opioid narcotic painkiller and a benzodiazepine drug without warning her that such medication either impaired or could impair her ability to safely operate an automobile. Shortly thereafter, Walsh drove herself from the Hospital and, while allegedly impaired by the medication administered to her at that facility, she was involved in an accident. The automobile she operated crossed a double yellow line and struck a bus driven by Edwin Davis (plaintiff).

The question presented:

Here we are confronted with the question whether third party liability can attach when a hospital administered drugs to a patient and then released her, in an impaired state, without any warning that the drugs affected or could have affected her ability to safely operate a motor vehicle. Stated differently, the main question is whether defendants owed a duty to plaintiff and his wife, Dianna, to warn Walsh that the medication defendants gave to Walsh either impaired or could have impaired her ability to safely operate a motor vehicle following her departure from the Hospital.

With the threshold concern that:

We are mindful that in addressing the modification of a legal duty, its reach must be limited by what is foreseeable. Any expansion of duty is a power to be exercised cautiously, but it is a power that must be used if the changing needs of society are to be met. It was succinctly stated by Judge Cardozo that “[t]he principle that the danger must be imminent does not change, but the things subject to the principle do change. They are whatever the needs of life in a developing civilization require them to be”[.]

Supreme Court granted Defendants’ motion to dismiss the complaint for failure to state a cause of action. The Appellate Division affirmed.  And the Court of Appeals granted leave to appeal.

The Court of Appeals concluded:

Under these facts, defendants owed to plaintiffs a duty to warn Walsh that the medication administered to her either impaired or could have impaired her ability to safely operate an automobile. We begin our discussion of that issue with reference to the principles of law that inform our review.

*     *     *

Said another way, our calculus is such that we assign the responsibility of care to the person or entity that can most effectively fulfill that obligation at the lowest cost. It is against that backdrop that we conclude that, under the facts alleged, defendants owed plaintiffs a duty to warn Walsh that the medication defendants administered to Walsh impaired her ability to safely operate a motor vehicle.

*     *     *

Here, put simply, to take the affirmative step of administering the medication at issue without warning Walsh about the disorienting effect of those drugs was to create a peril affecting every motorist in Walsh’s vicinity. Defendants are the only ones who could have provided a proper warning of the effects of that medication. Consequently, on the facts alleged, we conclude that defendants had a duty to plaintiffs to warn Walsh that the drugs administered to her impaired her ability to safely operate an automobile.

Were the following observations:

Our conclusion with respect to the duty owed in this case is accompanied by three observations. First, the “cost” of the duty imposed upon physicians and hospitals should be a small one: where a medical provider administers to a patient medication that impairs or could impair the patient’s ability to safely operate an automobile, the medical provider need do no more than simply warn that patient of those dangers. It is already the function of a physician to advise the patient of the risks and possible side effects of prescribed medication…Our decision herein imposes no additional obligation on a physician who administers prescribed medication. Rather, we merely extend the scope of persons to whom the physician may be responsible for failing to fulfill that responsibility.

Second, much as we are empowered to identify the duty articulated herein, it is within our authority to clarify how that obligation may be met. In that vein we reiterate that defendants and those similarly situated may comply with the duty recognized herein merely by advising one to whom such medication is administered of the dangers of that medication. Indeed, this case is not about preventing Walsh from leaving the Hospital, but ensuring that when Walsh left the Hospital, she was properly warned about the effects of the medication administered to her.

Third, our decision herein should not be construed as an erosion of the prevailing principle that courts should proceed cautiously and carefully in recognizing a duty of care. We have previously noted that, “[w]hile the temptation is always great to provide a form of relief to one who has suffered,…the law cannot provide a remedy for every injury incurred”…In other words, we have said that “[n]ot all mistakes . . . result in liability”…This decision does not reflect a retreat from those principles.

In consolidated appeals were the sidewalk defects too trivial to be actionable by plaintiffs who tripped on a sidewalk or stairway and were injured?  Answer:  Each case is fact sensitive.

Hutchinson v. Sheridan Hill House Corp., 2015 NY Slip Op 07578 (decided on October 20, 2015)

The three appeals each involved an individual who tripped on a defect in a sidewalk or stairway, and was injured. Their cases were dismissed before trial on the ground that the defect was characterized as too trivial to be actionable.  The Court of Appeals noted “it is usually more difficult to define what is trivial than what is significant.”

The Court of Appeals summarized the facts in the three cases:

On April 23, 2009, plaintiff Leonard Hutchinson was walking on a concrete sidewalk in the Bronx when his right foot “caught” on a metal object protruding from the sidewalk and he fell, sustaining injuries. Hutchinson commenced this personal injury action against Sheridan Hill House Corp. (Sheridan). The sidewalk where Hutchinson tripped abuts a building owned by Sheridan, which is responsible for maintaining the sidewalk in a reasonably safe condition under Administrative Code of the City of New York § 7-210 (a).

Discovery ensued. Hutchinson was deposed, along with a housing development director associated with Sheridan and two of its porters. Testimony was given that the sidewalk had been replaced in the summer of 2007. For his part, Hutchinson described the metal object as being “screwed on in the concrete” and gave rough estimates of its dimensions.

*     *     *

On May 2, 2010, plaintiff Matvey Zelichenko fell while walking down a staircase in the lobby of a residential building in Brooklyn he was visiting for the first time. The staircase has five risers or vertical elements. It has four step treads, made of terrazzo, 12 inches in horizontal depth, each with a one-inch nosing that projects over the riser below. There are handrails on each side, and Zelichenko made use of one.

On the second step tread from the bottom, Zelichenko’s right leg “got caught” when he stepped on a part of the nosing where there was a missing piece or “chip.” His leg twisted and he fell, with resulting injuries. Zelichenko commenced this personal injury action against 301 Oriental Boulevard, LLC (301 Oriental), the owner of the building.

During discovery, Zelichenko and the superintendent of the building gave deposition testimony. Zelichenko identified several photographs as fairly and accurately depicting the stairway and, in particular, the area of the missing “chip.” In one such photograph, a shoe-clad foot is shown on the step tread in question, next to an indentation in the nosing of the step; the toe of the shoe projects over the nosing.

*     *     *

On March 30, 2010, plaintiff Maureen Adler was injured in a fall on the interior staircase of the apartment building where she lived. As she recalled in her deposition testimony, she was walking down the stairs when her right foot “got caught” on “a big clump in the middle of the stair” — a protrusion of some sort in a step tread — which had “been painted over.” Adler commenced a personal injury action against QPI-VIII LLC and Vantage Management Services, LLC, the owner and manager of the building.

Adler’s counsel photographed the protrusion in the step, and at her deposition Adler acknowledged that the photographs fairly and accurately depicted the stairway and the “clump.” Adler testified that the stairway was illuminated by a 60-watt light bulb, that she was “[p]robably looking down” as she descended the stairs, that she did not recall any dirt or debris on the stairs, and that they were not slippery or cracked. She explained that she was very familiar with the stairway and in fact had seen the “clump” before on previous occasions.

The building superintendent testified that he had not noticed any uneven surface on the stairs prior to Adler’s accident nor received any complaints about such. He stated that the stairs had been painted some “three or four years before” the date of the accident.

The Court of Appeals summarized the “generic law”:

In Trincere v County of Suffolk (90 NY2d 976 [1997]), this Court held that “there is no ‘minimal dimension test’ or per se rule that a defect must be of a certain minimum height or depth in order to be actionable”…and therefore that granting summary judgment to a defendant “based exclusively on the dimension[s] of the…defect is unacceptable”…Plaintiff Trincere tripped over a concrete paving slab, raised about a half-inch in relation to the surrounding slabs in a plaza, and the lower courts dismissed her complaint, ruling the defect trivial as a matter of law. We held that a court must consider “all the facts and circumstances presented”…before concluding that no issue of fact exists, and emphasized that these factors will include, but should not be limited to, “the dimension[s] of the defect at issue”…For this reason, we noted that “whether a dangerous or defective condition exists on the property of another so as to create liability…is generally a question of fact for the jury”…Nevertheless, we noted that the Appellate Division had in fact considered all “the facts presented, including the width, depth, elevation, irregularity and appearance of the defect along with the time, place and circumstance of the injury”[.]

Trincere thus recognizes the doctrine that a defect alleged to have caused injury to a pedestrian may be trivial as a matter of law, but requires a holding of triviality to be based on all the specific facts and circumstances of the case, not size alone. In our opinion, we cited Guerrieri v Summa…, which expressed the trivial defect doctrine as the principle that a defendant “ ‘may not be cast in damages for negligent maintenance by reason of trivial defects on a walkway, not constituting a trap or nuisance, as a consequence of which a pedestrian might merely stumble, stub his toes, or trip over a raised projection’”…Trincere and the line of cases in which it stands establish the principle that a small difference in height or other physically insignificant defect is actionable if its intrinsic characteristics or the surrounding circumstances magnify the dangers it poses, so that it “unreasonably imperil[s] the safety of” a pedestrian[.]

The Court warned that:

Repetition of the phrase “not constituting a trap” in many Appellate Division opinions should not be taken to limit the means by which a plaintiff may demonstrate a question of fact concerning the hazard posed by a physically small defect. Liability does not “turn upon whether the hole or depression, causing the pedestrian to fall…constitutes ‘a trap’”…The case law provides numerous examples of factors that may render a physically small defect actionable, including a jagged edge…the presence of other defects in the vicinity…poor lighting…such as a parking lot, premises entrance/exit, or heavily traveled walkway — where pedestrians are naturally distracted from looking down at their feet[.]

Noting that:

Noting that, our survey of such cases indicates that the lower courts, appropriately, find physically small defects to be actionable when their surrounding circumstances or intrinsic characteristics make them difficult for a pedestrian to see or to identify as hazards or difficult to traverse safely on foot. Attention to the specific circumstances is always required and undue or exclusive focus on whether a defect is a “trap” or “snare” is not in keeping with Loughran and Trincere.

With the admonition that:

Finally, the trivial defect doctrine is best understood with our well-established summary judgment standards in mind. In a summary judgment motion, the movant must make a prima facie showing of entitlement to judgment as a matter of law before the burden shifts to the party opposing the motion to establish the existence of a material issue of fact[.]  A defendant seeking dismissal of a complaint on the basis that the alleged defect is trivial must make a prima facie showing that the defect is, under the circumstances, physically insignificant and that the characteristics of the defect or the surrounding circumstances do not increase the risks it poses. Only then does the burden shift to the plaintiff to establish an issue of fact.

The Court of Appeals gave the following guidance to the lower courts:

Trincere stands for the proposition that a defendant cannot use the trivial defect doctrine to prevail on a summary judgment motion solely on the basis of the dimensions of an alleged defect, and that the reviewing court is obliged to consider all the facts and circumstances presented when it decides the motion. Summary judgment should not be granted to a defendant on the basis of “a mechanistic disposition of a case based exclusively on the dimension[s] of the . . . defect”…, and neither should summary judgment be granted in a case in which the dimensions of the alleged defect are unknown and the photographs and descriptions inconclusive…Moreover, in deciding whether a defendant has met its burden of showing prima facie triviality, a court must — except in unusual circumstances not present here — avoid interjecting the question whether the plaintiff might have avoided the accident simply by placing his feet elsewhere…In sum, there are no shortcuts to summary judgment in a slip-and-fall case.

The Court held that, in two of the three appeals, the plaintiffs were entitled to a trial.

Does an individual have to suffer a unique injury to have standing to challenge governmental action in a land use matter?  Answer:  No, as long as the alleged injury is real and different from the injury most members of the public face.

Matter of Sierra Club v. Village of Painted Post, 2015 NY Slip Op 08452 (decided on November 19, 2015).

The Court of Appeals had the opportunity in this case to elucidate its holding in in Society of Plastics Indus. v County of Suffolk concerning standing to challenge governmental action in land use matters, generally, and under the State Environmental Quality Review Act, specifically.

The Village of Painted Post, and other municipalities utilized the Corning aquifer as their principal drinking water supply.  The Board of Trustees of the Village adopted a resolution to enter into a bulk water sale agreement with SWEPI, LP, a subsidiary of Shell Oil Co., which operates gas wells in Tioga County, Pennsylvania.  The Village approved a lease agreement with respondent Wellsboro & Corning Railroad for the construction of a water transloading facility on 11.8 acres of land, previously used for industrial purposes, to be used as a filling station upon which the water would be withdrawn, loaded, and transported by rail line to Wellsboro, Pennsylvania.

Construction of the water loading facility began in April 2012, and in June 2012, petitioners (an array of individuals and entities) commenced a CPLR article 78 proceeding against the Village and others challenging the Village’s action to enjoin the Village from entering into the water sale and lease agreements until it complied with all federal and state laws.

Respondents moved to dismiss the petition, asserting, inter alia, that petitioners lacked standing.  Petitioner John Marvin, in an affidavit, stated that when the water trains began running, he “heard train noises frequently, sometimes every night” and that the “[t]he noise was so loud it woke [him] up and kept [him] awake repeatedly.” Marvin further stated that the “noise was much louder than the noise from other trains that run through the [V]illage” and he was concerned that the “increased train noise will adversely impact [his] quality of life and home value.”

Supreme Court held that Marvin had standing.  It noted that he could see the facility from his porch, and concluded that Marvin’s allegation of “train noise newly introduced into his neighborhood . . . is different than the noise suffered by the public in general.”  The Court addressed the petition on the merits based on Marvin’s standing.

The Appellate Division reversed as to standing:

[E]mphasizing that “Marvin raised no complaints concerning noise from the transloading facility itself”…the court…reasoned that “[i]nasmuch as we are dealing with the noise of a train that moves throughout the entire Village, as opposed to the stationary noise of the transloading facility, we conclude that Marvin will not suffer noise impacts ‘different in kind or degree from the public at large’”.

Having dismissed the petition for lack of standing, the Appellate Division did not reach the merits of the SEQRA challenge.

The Court of Appeals reviewed its earlier standing decisions:

We held in Society of Plastics that “[i]n land use matters . . . the plaintiff, for standing purposes, must show that it would suffer direct harm, injury that is in some way different from that of the public at large”…Applying that test in [a subsequent case], this Court held that petitioners, who alleged “repeated, not rare or isolated use” of the Pine Barrens recreation area, had demonstrated standing “by showing that the threatened harm of which petitioners complain will affect them differently from ‘the public at large’“[.]

The Court held that the Appellate Division had applied an overly restrictive analysis.  Importantly the Court held:

That more than one person may be harmed does not defeat standing, . . . “[W]e have…made it clear that standing is not to be denied simply because many people suffer the same injury . . . To deny standing to persons who are in fact injured simply because many others are also injured, would mean that the most injurious and widespread Government actions could be questioned by nobody.”  The harm that is alleged must be specific to the individuals who allege it, and must be “different in kind or degree from the public at large”…but it need not be unique. Here, petitioner Marvin is not alleging an indirect, collateral effect from the increased train noise that will be experienced by the public at large, but rather a particularized harm that may also be inflicted upon others in the community who live near the tracks.  The number of people who are affected by the challenged action is not dispositive of standing.

And concluded by noting that:

Marvin alleges injuries that are “real and different from the injury most members of the public face”…Thus, his allegation about train noise caused by the increased train traffic keeping him awake at night, even without any express differentiation between the train noise running along the tracks and the noise from the transloading facility, would be sufficient to confer standing.

The case was remanded to the Appellate Division to consider the merits case.

Did a whistleblower, who failed to inform the appointing authorities about an improper governmental action, comply with the reporting requirements of the Civil Service Law?  Answer:  Yes, where the failure was a result of the fact that the authorities were the improper actors.

Tipaldo v. Lynn, 2015 NY Slip Op 07698 (decided on October 22, 2015)

In this 18-year old “whistleblower” action, the Court of Appeals initially addressed the question of “whether plaintiff John Tipaldo made a good faith effort to comply with the reporting requirements of Civil Service Law§ 75-b?

The Court of Appeals summarized the facts:

Plaintiff was employed by New York City’s Department of Transportation (DOT) and served as the DOT’s Acting Assistant Commissioner for Planning and Engineering. He was apparently promised that at some point that position would become permanent and be accompanied by a significant pay increase. While he held that position plaintiff supervised the Queensborough Bridge Project which involved procuring a variety of street signs, including “don’t honk” signs to advise motorists of possible fines. Plaintiff discovered an alleged scheme by his superiors, defendants Christopher Lynn, then-Commissioner of the DOT, and Richard Malchow, then-First Deputy Commissioner of the DOT, to award a signage contract to Lynn’s acquaintance in violation of the City’s public bidding rules. The day after placing an order for the signs from Lynn’s acquaintance on November 6, 1996, a meeting was held informing DOT employees, including Tipaldo, that the signs had been purchased. According to plaintiff, he and other employees questioned the legality of the process and the DOT employees whose signatures were required to authorize the purchase refused to sign the authorization. The following day, November 8, Lynn and Malchow then solicited bids from the public. Following the delivery and installment of the signs, the DOT received several lower bids compared to the $6,000 paid to Lynn’s acquaintance. Defendants thereafter allegedly created a backdated memorandum stating that the need for the signs was “urgent” and that the order must be placed immediately, rather than go through the bidding process.

Plaintiff informed his immediate supervisors about defendants’ alleged misconduct. One or two business days later, plaintiff reported defendants’ alleged actions to the Office of the Inspector General for the DOT and requested an investigation. Plaintiff claims that shortly after filing his report with the Inspector General, Lynn and Malchow retaliated against him by excluding him from meetings, removing him from supervising and managing several projects, and publicly making negative comments about him. Eventually, plaintiff was removed from his position and demoted.

Plaintiff commenced an action in 1997, pursuant to Civil Service Law § 75-b. He alleged that he was retaliated against for reporting improper governmental activity and sought a permanent injunction, reinstatement, all lost compensation, punitive damages, attorney’s fees, and costs. Cross-motions for summary judgment resulted in dismissal of the complaint.

In 2008, the Appellate Division reversed and granted plaintiff’s motion for summary judgment, stating:

“[T]here is no dispute that retaliatory actions were taken against plaintiff, and although a cause of action pursuant to the subject statute requires plaintiff to have first reported the alleged violation to the internal [DOT] ‘appointing authority,’ here, that was defendants”…The court determined that “plaintiff’s good faith efforts in the manner and filing of his reporting, first informally to his immediate supervisors, and then soon thereafter to the [DOI], satisfactorily met the requirements of Civil Service Law § 75-b (2)”[.]

On remand, at a bench trial the plaintiff presented the only evidence on damages.  The trial court entered judgment for plaintiff.  In a second non-final order in 2010, the Supreme Court then directed judgment to be entered in favor of plaintiff.

The Court of Appeals summarized the proceedings in the Appellate Division:

The Appellate Division modified the judgment but also “determined that Supreme Court failed to explain how it calculated the award and did not address plaintiff’s requests for consequential damages or reinstatement to an equivalent position.”

A second remand occurred in which the Supreme Court corrected the deficiencies.

As the non-final 2008 Appellate Division Order was reviewed as to the compliance with the Civil Service Law, the Court of Appeals held that:

[P]laintiff complied with the statutory reporting requirement by informing his immediate supervisors of the misconduct and thereafter reporting the misconduct to the DOT Inspector General. Whistleblowing is encouraged to prevent employer misconduct and provide appropriate remedies when it occurs. Employees in situations like plaintiff’s should not be required to report to the appointing authority where such a report would prove impractical and possibly impede prompt resolution of the matter. Notably, here, plaintiff believed the appointing authority was on notice of the alleged improper governmental action, based on plaintiff and other employees’ expression of concern after a DOT meeting, DOT employees’ refusal to approve the appointing authority’s purchase, and the appointing authority’s subsequent solicitation of bids followed by the issuance of a backdated memorandum claiming that the process needed to be expedited. Additionally, in view of the requirement, set forth in both Executive Law No. 16 and the DOT employee handbook, that employees such as plaintiff disclose misconduct to the DOT Inspector General directly and without undue haste or face possible termination of their employment, we cannot say that plaintiff lacked “good faith” in reporting to his immediate supervisors only one or two business days before he reported his allegations to the DOT Inspector General. Therefore, given the conditions plaintiff was facing, an overall view of his actions demonstrates good faith compliance with Civil Service Law § 75-b.

Did grandparents have standing to seek custody of a child who lived with the grandparents for a long period of time during which the child had contact, and spent time, with a parent?  Answer:  Yes, if the grandparents can establish extraordinary circumstances.

Matter of Suarez v. Williams, 2015 NY Slip Op 09231 (decided on December 16, 2015)

The Court of Appeals outlined the facts:

The child at issue here (born 2002) lived with his paternal grandparents, beginning when he was less than 10 days old and continuing until he was almost 10 years old. The child’s father moved out of state in 2004 and has had visitation since then. The child’s mother lived approximately 12 miles from the grandparents for the child’s first few years, until the grandparents moved the mother (and her daughters from a previous relationship) into a trailer that the grandparents purchased and situated in a trailer park across the street from their residence, so she would be close to the child. In a 2006 proceeding in which the grandparents were not involved, the child’s parents obtained a consent order awarding the parents joint legal custody, with primary physical custody to the mother. Nevertheless, the reality of the family’s situation did not change; the child continued to reside with the grandparents. Also in 2006, the grandparents moved to an adjoining county. Due to the distance between their homes, the mother had less contact with the child until late 2008, when the grandparents again helped her move closer to them. The grandparents evidently kept the mother informed of the child’s activities almost daily. In addition, the mother saw the child regularly including, at times, weekly overnight visits and vacations. In 2010, the mother began a relationship with a new boyfriend, and they gradually began making plans to live together. In 2012, after the father sought custody from the mother and a termination of his child support payments to her, she refused to return the child to the grandparents after a visit, relying on the 2006 custody order granting her primary physical custody. At that time, the mother told the grandparents that they had had the child for many years, it was her “turn now,” and they could no longer see him.

The prior proceedings in Family Court:

As a result, the grandparents commenced this proceeding seeking primary physical custody of the child. Following a 10-day hearing, Family Court found that the mother was generally not credible and that “the [g]randparents’ version of where [the child] lived since birth is the substantiated and more accurate representation of reality.” The court found that there had been an extended disruption of custody between the mother and the child, and that the mother voluntarily relinquished care and control of him to the grandparents — through three written documents and through her behavior — and concluded that this amounted to extraordinary circumstances. The court then considered the child’s best interest and granted joint custody to the grandparents and the father, with primary physical custody to the grandparents and visitation to each parent.

The Court of Appeals explained:

The Appellate Division reversed and dismissed the grandparents’ petition…Specifically declining to disturb Family Court’s credibility determinations, the Appellate Division found the situation to be akin to joint custody, with the grandparents having primary physical custody and the mother having visitation. Nevertheless, the Court held that the grandparents failed to demonstrate extraordinary circumstances, in light of the mother’s presence in the child’s life, even though he was primarily living with the grandparents. Thus, the Court concluded that the grandparents lacked standing to seek custody and dismissed their petition. This Court granted the grandparents leave and a stay pending appeal[.]

The legal template:

In the seminal case of Matter of Bennett v. Jeffreys, we created a two-prong inquiry for determining whether a nonparent may obtain custody as against a parent…First, the nonparent must prove the existence of “extraordinary circumstances” such as “surrender, abandonment, persisting neglect, unfitness, and unfortunate or involuntary disruption of custody over an extended period of time”…”or other like extraordinary circumstances”…If extraordinary circumstances are established such that the nonparent has standing to seek custody, the court must make an award of custody based on the best interest of the child[.]

Consistent with that case, Domestic Relations Law § 72 (2) contains a specific example of extraordinary circumstances. Originally, Domestic Relations Law § 72 addressed only grandparent visitation. However, in recognition of the important role of grandparents and the increasing number of grandparents raising their grandchildren, the Legislature amended the statute in 2003 to include a second subdivision, pertaining to custody…That subdivision provides that “[w]here a grandparent…of a minor child…can demonstrate to the satisfaction of the court the existence of extraordinary circumstances, such grandparent…may apply to family court [for custody],” and the court “may make such directions as the best interests of the child may require, for custody rights for such grandparent…in respect to such child. An extended disruption of custody, as such term is defined in this section, shall constitute an extraordinary circumstance”…[a] [emphasis added]). The statute then defines “extended disruption of custody” to

“include, but not be limited to, a prolonged separation of the respondent parent and the child for at least [24] continuous months during which the parent voluntarily relinquished care and control of the child and the child resided in the household of the petitioner grandparent or grandparents, provided, however, that the court may find that extraordinary circumstances exist should the prolonged separation have lasted for less than [24] months[.]”

*     *     *

Domestic Relations Law § 72 (2) sets forth three “elements” required to demonstrate the extraordinary circumstance of an “extended disruption of custody,” specifically: (1) a 24-month separation of the parent and child, which is identified as “prolonged,” (2) the parent’s voluntary relinquishment of care and control of the child during such period, and (3) the residence of the child in the grandparents’ household. Regarding the third element, inasmuch as both Family Court and the Appellate Division found that the child primarily lived with the grandparents for almost 10 years, and that factual finding is supported by the record, we may not disturb it…Consequently, only the first two elements are seriously in dispute here.

The Court responded to the mother’s arguments:

Contrary to the mother’s contention, a lack of contact is not a separate element under the statute. Indeed, there is no explicit statutory reference to contact or the lack thereof. Rather, the quality and quantity of contact between the parent and child are simply factors to be considered in the context of the totality of the circumstances when determining whether the parent voluntarily relinquished care and control of the child, and whether the child actually resided with the grandparents for the required “prolonged” period of time. Indeed, some Appellate Division cases have identified a variety of factors for courts to consider in determining whether extraordinary circumstances exist, such as “the length of time the child has lived with the nonparent, the quality of that relationship and the length of time the biological parent allowed such custody to continue without trying to assume the primary parental role”…All of these factors are components of the totality of the circumstances for the court to consider, and also relate to the enumerated elements under the statute.

And applied the law to the facts:

Here, the mother argues that the grandparents were only acting with her permission when making decisions regarding the child. She concedes that she signed three documents, each giving the grandparents permission to make such decisions, including medical and educational decisions, without any time limitation, but contends that the documents prove that she retained ultimate control over all decisions. Family Court concluded that the documents, and the mother’s conduct, showed that she relinquished her authority and responsibility to make the decisions. The Appellate Division, on the other hand, concluded that the grandparents relied on the mother’s permission…In our view, Family Court’s interpretation of the documents, and their implications here, is more accurate. The grandparents obtained the documents because there was no custody order giving the grandparents the legal right to make such decisions, although the child was in their physical custody a majority of the time, and they needed to be prepared for all types of situations. Nevertheless, the mother freely signed over virtually all decision-making rights indefinitely — she did not limit the permission to times when she was unavailable — demonstrating her intent that the grandparents “permanently assume the parental responsibility” of caring for the child[.]

As for the parties’ conduct, the grandparents spoke with the mother almost daily about the child. The mother claims that they did so to seek her permission before making decisions about the child. However, the evidence is more consistent with Family Court’s conclusion that the grandparents made all decisions about the child and merely kept the mother informed of the decisions that they had made or were about to make. For example, the mother and her boyfriend testified that, at least as early as 2011, she wanted to enroll the child in a school in the district where she lived, rather than the district of the grandparents’ residence. The grandparents desired to keep the child in their district, where he had always attended school. The mother did not make any change in the child’s school enrollment until the summer of 2012, after this proceeding had commenced. In addition, the mother could have expressly revoked her written permission, or specifically limited the authorization to making medical decisions in emergency situations, but she never did so. Instead, her conduct, and that of the grandparents, supports Family Court’s finding that “in reality [the mother] relinquished her parental control and decision making authority in writing and in practice to the [g]randparents.”

And concluded its analysis:

In sum, the evidence more closely comports with Family Court’s finding that the mother voluntarily relinquished care and control of the child for more than 24 months, even though she had regular contact and visitation with him…The mother allowed the grandparents to assume control over, and responsibility for the care of, the child while he resided with them for a prolonged period of years, during which she assumed the role of a noncustodial parent in virtually every way…Where, as here, the mother has effectively transferred custody of the child to the grandparents for a prolonged period of time, the circumstances rise to the level of extraordinary, as required under our law to confer standing upon the grandparents to petition the courts to formally obtain legal custody.


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