There is an old idiom that says: “the devil is in the details.” It generally means that although something may seem simple, the details are complicated and likely to cause problems. This aptly describes pleading a fraud claim under New York law. To state a claim for fraud, a plaintiff must allege a material misrepresentation of fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages. Eurycleia Partners, LP v. Seward & K

Standing to sue derivatively requires stock ownership in the corporation at the time the lawsuit is filed and at the time of the wrongful occurrence. As noted in a recent article posted by this Blog ( here ), these standing requirements are strictly enforced. Now comes another decision from the New York Appellate Division, Second Department, that reiterates the point that the absence of standing is the death knell of a shareholder’s derivative action. , 2017 N.Y. Slip Op. 085

In prior posts, this Blog has discussed the elements required to assert a shareholder’s derivative action. ( Here .) Today’s article focuses on the standing requirements needed to commence such an action and the consequences of not satisfying them. What is a Derivative Action? A shareholder’s derivative action is a lawsuit “brought in the right of a … corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates of the corporation or of

Many leases provide for a tenant’s option to purchase the subject real property. The recent case of Blackburn Food Corp., et. al. v. Ardi, Inc., et. al ., (Sup. Ct. Suffolk Co. October 25, 2107), illustrates the importance of, inter alia , careful drafting when dealing with real property purchase option agreements. The plaintiffs in Blackburn entered into a ten-year lease for real property. The lease contained an option, which, if exercised within the first three years of

If a contracting party intends for the obligations under a contract to be executed by a business entity, it is critical that the person executing the contract on behalf of the entity clearly indicate that the contract is being signed in a representative capacity. This point was recently reiterated in James E. Cayne v. Alexandra Lebenthal , (Sup. Ct. New York Co. October 30, 2017) (the “Action”). The Defendant in Cayne is Alexandra Lebenthal, CEO of Lebenthal Holdings, LLC

Preliminary injunctions can be an important and potent weapon in business and commercial litigation. In New York, “ preliminary injunction may be granted … where it appears that the defendant threatens or is about to do … an act in violation of the plaintiff’s rights” with regard to the subject matter of the action, and which “render the judgment ineffectual ….” CPLR 6301. Whether to grant a preliminary injunction lies within the sound discretion of the court. Doe v. Axe

Parties to commercial and business disputes frequently encounter and litigate the threshold question whether their dispute must be arbitrated rather than litigated in court. But, before this question can be answered, there is an even more fundamental question that must be resolved: who decides whether a dispute is subject to arbitration – the court or the arbitrator? Courts have struggled with this question for years and continue to do so today. Generally, whether a claim is

The Basics A contract is an agreement between two or more parties to do something ( e.g. , provide goods or services) in exchange for a benefit. When one or more parties to a contract fails to perform a term in their agreement, they are in breach of that agreement. Most breaches fall into one of two categories: actual or anticipatory. In the former, a party to the contract fails or refuses to perform his/her obligations under the agreement or performs his/her obligations i

Contracts are often at the heart of business and commercial disputes. Not all contract disputes result in litigation. A well-drafted contract can often prevent or resolve a dispute before the parties run to court. But, when the parties cannot resolve their differences, and resort to litigation, it is important to understand the rules governing the breach of contract claim. As a general matter, to allege a breach of contract, a plaintiff must plead (and prove) the following:

The claim of assumpsit (from the Latin indebitatus assumpsit ) was “developed to redress circumstances involving unjust enrichment or to ‘prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep.’” Tri-State Chem., Inc. v. Western Organics, Inc. , 83 S.W.3d 189, 193-94 (Tex. App.-Amarillo 2002, pet. denied) (citation omitted); Parsa v. State of New York , 64 N.Y.2d 143, 148 (1984). “It encompassed an o

Implicit in every contract is a covenant of good faith and fair dealing. New York Univ. v. Continental Ins. Co. , 87 N.Y.2d 308, 318 (1995). “The covenant is breached where one party to a contract seeks to prevent its performance by, or to withhold its benefits from, the other.” Michaan v. Gazebo Hort., Inc. , 117 A.D.3d 692, 693 (2d Dept. 2014) (citation and quotation omitted). “While the duties of good faith and fair dealing do not imply obligations inconsistent with other

Previously, this Blog considered the rules for judicial dissolution of a limited liability company (“LLC”). Here . A brief reminder follows below. Under Section 702 of New York’s Limited Liability Company Law (“LLCL”), a court sitting in the judicial district in which the office of the company is located may dissolve the company “whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.” LLCL §

In July, this Blog wrote about the settlement in connection with Wells Fargo & Co.’s phony accounts scandal that will require the bank to pay millions of dollars to aggrieved customers. Now, Wells Fargo has disclosed in a regulatory filing that the Consumer Finance Protection Bureau ("CFPB") is investigating whether the bank incorrectly closed real accounts and left customers without access to their funds. CFPB Probes Wells Fargo Account Closures The CFPB probe was commenced

When disputes arise over the meaning of a contract or a clause within a contract, courts are called upon to interpret the agreement to give it meaning. Courts in textualist jurisdictions will examine the language of the contract as whole – the “four corners rule” – rather than the disputed clause in isolation. And, when the contract is clear, unambiguous and fully integrated ( i.e. , the parties have integrated their agreement into a single writing), all prior negotiations an

The foundation of virtually every business and commercial transaction is a contract. Indeed, it is hard to imagine any transaction for the purchase or sale of goods, the merger or acquisition of a business, or the provision of services that is not founded upon a contract. There is almost nothing more frustrating, or potentially costlier, to businesses and commercial practitioners than a dispute over the meaning of a contract. Such disputes often arise over the performance or

According to the latest report from Cornerstone Research, which it jointly prepared with the Stanford Securities Class Action Clearinghouse, titled “Securities Class Action Filings – 2017 Mid-Year Assessment,” securities class action lawsuits hit a record pace during the first 6 months of 2017. (The press release announcing the issuance of the Report can be found here .) By the end of June 2017, plaintiffs filed 226 securities fraud class actions in federal court, more tha

As a general matter, when parties negotiate an agreement in a clear and unambiguous document, their writing will be enforced according to its terms. Evidence outside the four corners of the document as to what the parties really intended ( i.e. , parole evidence) is generally inadmissible. Golden Gate Yacht Club v. Societe Nautique De Geneve , 12 N.Y.3d 248 (2009). Among the reasons for this rule is to give “stability to commercial transactions,” and other types of commercial

In business, relationships are important. One relationship that is essential to successful businesses is the principal-agent relationship. A principal-agent relationship may be established by evidence of the consent of one person to allow another to act on his or her behalf and subject to his or her control, and consent by the other to act, even where the agent is acting as a volunteer. 5015 Art Fin. Partners, LLC v. Christie’s Inc. , 58 A.D.3d 469, 471 (1st Dept. 2009) (quo

Notice and reporting requirements in public contracts are common in public works projects. They provide public agencies with timely notice of deviations from budgeted expenditures or of any supposed malfeasance, and allow them to take early steps to avoid extra or unnecessary expense, make any necessary adjustments, mitigate damages and avoid the waste of public funds. A.H.A. Gen. Constr. v. New York City Hous. Auth. , 92 N.Y.2d 20, 33-34 (1998). Such provisions are importan

It is well settled that “ very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Restatement (Second) of Contracts § 205 (1981). See also 511 W 232nd Owners Corp. v Jennifer Realty Co. , 98 N.Y.2d 144, 153 (2002) (“In New York, all contracts imply a covenant of good faith and fair dealing in the course of performance”). “This covenant embraces a pledge that neither party shall do anything which will have the effect