New York Business Litigation Lawyer Blog

Bank sued homeowner for default of a mortgage. Defendant homeowner claimed that bank failed to deduct the monthly payments automatically as was agreed to between the parties. The court held that because homeowner attempted to make payments, and in fact made some of the payments manually, and that the mortgage payments were at all times available in his account, bank was unable to establish a default. (March 2007)

To retain and attract customers, companies and business must be creative in marketing their products and services. An attractive and popular way to do that, is to sponsor games such as contests or sweepstakes. These are typically less expensive than other methods as costs are often shared by more than one promoting company, and are popular with the public because prizes are awarded. It is important to keep in mind, however, that this type of marketing is governed by laws which vary by state, and has technical requirements that are not well publicized. As such, games must be well planned and properly executed. This article will provide an overview of the differences between sweepstakes and contests and highlight issues facing those who sponsor these games to the public.

There are three elements to these types of games: Chance, consideration (meaning a payment of some kind, including the effort involved in creating and submitting something) and a prize. Lotteries, which contain all three elements, are state sponsored but otherwise illegal. Contests and sweepstakes contain only two of these three elements and for that reason are allowed. Contests, where people submit something hoping to win a prize, involve consideration (whatever is being submitted, such as an essay or drawing) and a prize. Sweepstakes have elements of chance and a prize. If a contest were to have an element of chance or, if a sweepstakes were to require consideration, that contest or sweepstakes would violate the law.

Despite well-planned events, the element of chance some- times creeps into a contest and can doom it. For example, where judging criteria is not properly set forth, or if the judges are not qualified to judge the entries, submissions are deemed to be subject to chance. In addition, a contest must require that the entrant exhibit a true skill, though not necessarily an advanced skill, otherwise it may be deemed to include an element of chance (such as “count the jelly bean” contest where no true skill is involved).

The plaintiff, a construction worker, fell and was hurt while working on defendant’s yacht. The plaintiff sued for his injuries. Under the labor law, one and two family dwellings are exempt from the rule that a property owner is liable for a worker’s injuries no matter the level of the homeowner’s control over the work site. The court found that a dwelling is defined as a structure in which people reside or sleep, but not limited to a building or primary residence. Because the defendant claimed that he and his family would regularly sleep in the yacht, and because the yacht had all the features of a small home and was treated by the defendant as a second home for tax purposes, the court found the yacht to be a home and defendant exempt from this law. The court dismissed the case. (11/06)

Defendant, employee, worked as a manager for a residential building. During the course of an eviction, the building learned that its employee allowed a tenant to remain in his rent-stabilized despite his potential ineligibility, because the employee felt that the tenant had a legal right to do so. The building sued its employee for fraud and breach of her employment contract, among other things. When the tenant was later allowed by the court to stay in the rent-stabilized apartment, the employee sought the dismissal of the action against her claiming that because her conduct was correct, and the employer would have been compelled to allow the tenant to remain, she caused the employer no injury and could not be held accountable. The court disagreed and held that under the faithless servant doctrine, the employee’s disloyalty was relevant, and not the consequences of her disloyalty. Thus, because the employee committed a wrong, she may be liable to her employer.

In the course of attacking his companion, defendant destroyed a fish tank and stepped on a goldfish killing it. Defendant claimed that the goldfish was not a companion animal and was therefore not subject to the criminal statute forbidding cruelty to animals. The relevant statute defines a companion animal as a dog or cat and any other domesticated animal. Defendant claimed that a goldfish cannot be a companion because it is not domesticated nor able to reciprocate feelings to its owner. Defendant claimed further that a domesticated animal has no desire or inclination to escape. A goldfish, however, would swim away if dropped into a body of water. The court, in rejecting defendant’s claims, held that the statute did not require feelings of mutual affection and that domestication merely meant an animal living with humans and not a wild animal. Loyalty was not required; many pets would escape if given the opportunity.

There has been a major change to the publication requirement of the LLC, PLLC and LLP laws. Presently, an entity must publish the fact of its creation, date of filing and/or formation, county where the entity is located, purpose, and address for service of process in two weekly newspapers, once a week for six weeks. The penalty for failing to publish is the loss of the entity’s ability to sue. As of June 1, 2006, the content of the publication and the penalty for failing to publish change dramatically. As of June 1, these entities must also publish the names of the ten members of the entity who are actively engaged in the business and hold the most valuable interest (all of the members’ names must be published where there are less than 10 members). The frequency of the publication is also changed, from six weeks in a weekly newspaper, to four weeks, but in one weekly and in one daily. Although unclear, the size of the notice of publication may be larger than is presently required. The penalty for failing to publish is the suspension of the entity’s right to carry on its business. In addition to being unable to carry on its business, this provision creates a significant concern that once the entity is suspended—which is automatic after 120 days from the date of entity’s formation—the members of the entity will continue to operate as a business but without the liability protection offered by the entity. Even if the suspension is cured, and publication is made, it is unclear whether the members/partners of the entity retained their liability protection for the period of the suspension. Mistakes or inadvertent omissions of a member or partner’s name will not void the publication. Certain investment companies/funds are exempt from the “10 person” portion of the disclosure. These new publication requirements also apply to entities formed before June 1, 2006, but entities formed before January 1, 1999 are deemed to be in compliance. Entities formed between January 1, 1999 and May 31, 2006, have 18 months to publish or face suspension. It appears that retroactive protection is retained for these entities, so long as publication under this new law is timely made (18 months from June 1, 2006). I have read that there is a competing bill, not yet signed into law, which will, among other things, shorten this cure period from 18 months to 120 days and change the publication period back to six weeks. This bill also states that absent publication, the members/partners are personally liable for the debts and obligations incurred by the entity after June 1, 2006.

Plaintiff sought to enjoin defendant, a past employee, from working for a competitor, alleging that the defendant was competing with plaintiff using trade secrets learned while working for plaintiff. Defendant claimed that he was coerced into signing the non-compete agreement, that the trade secrets were not really secrets and that he performed no special services for plaintiff that would serve as a basis for granting an injunction. The court found that plaintiff’s threat to fire defendant if he did not sign the agreement was not coercion and that the complexities of the business coupled with defendant’s advanced degrees were sufficient to find that plaintiff had a right to prevent defendant from unfairly competing by using critical trade secrets defendant learned while employed by plaintiff.

Defendant, a photographer, took a photo of a Hasidic Jew walking on the streets of New York City, without permission. This photo was included in an advertised and well-publicized exhibit open to the public, and some of the publications and reviews of the exhibit included a copy of this photo. In addition, a few copies of the picture were sold for amounts between $20,000 and $30,000. The subject of the picture sued the photographer for violating civil rights laws which bar the unauthorized use of another’s likeness in a commercial venture. He alleged also that this photo violated his religious beliefs. In addition to finding that plaintiff’s time to sue had expired, the court agreed with the photographer that the civil rights laws at issues were applicable only to bar an unauthorized use in connection with advertising and/or trade. Because the photos were art and not advertising or trade they were therefore excluded from these laws. The court held also that the photo was protected free speech even though significant sales were made, noting that the fact that profits were earned did not defeat the defense of free speech.

A will which directed that a trust be created at the donor’s death, released the trustee from losses resulting from the trustee’s failure to diversify the trust investments (which were heavily concentrated at the time the trust was created in the stock of one company). The trustee was, however, directed to sell the investments for compelling reasons. The court, using its own analysis, found that the trustee’s failure to sell the stock of that one company as the value declined by more than 17% over a specific period, coupled with the fact that the trust’s investments returned less than half of the Standard and Poor’s index, was negligent and refused to dismiss a lawsuit seeking recovery based on that negligence. (7/04) Update. In February 2006, the Appellate Division, Fourth Department, unanimously reversed the lower Surrogate’s Court finding and held that the trustee committed no wrong in failing to sell the stock at issue. The court agreed with the Surrogate in finding that the heirs objecting to the trustees conduct did not establish a basis for recovery based on the allegations in the petition, but did not agree that the Surrogate could, on its own and absent allegations by the heirs, determine that the trustee was negligent. The Appellate Division objected to the Surrogate’s decision as being based on hindsight and found that holding the stock was not a bad decision, based on impartial investment information. (2/06)

Director of a non-profit challenged his removal by the remaining board members because his removal was not voted upon at a special meeting called for the specific purpose of removal, as required by the non-profit’s governing rules. The Board claimed that because the removal was voted upon at a regular meeting, and because regular meetings addressed all issues relevant to the non-profit, the Director had sufficient notice and a special meeting was unnecessary. The court held that the failure to provide the Director an opportunity to defend himself in advance of the meeting, a right afforded a board member under the law, defeated the Board’s argument and the Director’s removal was invalid.