NY Commercial Division Blog

Visit the Full Blog

Patterson Belknap’s Commercial Division Blog covers developments related to practice and case law in the Commercial Division of the New York State Supreme Court.  The Commercial Division was formed in 1993 to enhance the quality of judicial adjudication and to improve efficiency in the case management of commercial disputes that are litigated in New York State courts. Since then, the Division has become a leading venue for judicial resolution of high-stakes and every-day commercial disputes.  This Blog reviews key developments in the Commercial Division, including important decisions handed down by the Commercial Division, appellate court decisions reviewing Commercial Division decisions, and changes and proposed changes to Commercial Division rules and practices.  Our aim is to provide you with thoughtful and succinct analysis of these issues.  The Blog is written by experienced commercial litigators who have substantial practices in the Commercial Division. It is edited and managed by Stephen P. Younger and Muhammad U. Faridi, who spearheaded the publication of the New York Commercial Division Practice Guide, which is part of Bloomberg Law's Litigation Practice Portfolio Series.

Commercial Division Dismisses Shareholder Derivative Suit Because General News Reports and Articles Were Insufficient to Plead Demand Futility with Particularity

Before filing a shareholder derivative suit, the plaintiff must typically serve a pre-litigation demand upon the company’s Board of Directors, except in narrow circumstances where the demand may be futile.  In Gammel v. Immelt, Justice Andrea Masley of the New York Commercial Division dismissed the shareholder derivative suit because the plaintiff did not meet the pre-litigation demand requirement and failed to plead with particularity the circumstances establishing the futility exception.

Go

Bronx County Commercial Division Begins its Inaugural Term on September 3, 2019

At her annual State of the Judiciary speech held on February 26, 2019 at Bronx County Supreme Court, Chief Judge Janet DiFiore announced that the Commercial Division will be expanding to Bronx County, effective April 1, 2019.  On August 4, 2019, the Bronx County Supreme Court designated the Honorable Eddie McShan, who is a Supreme Court Justice from Bronx County, as the Commercial Division Justice presiding over the newly-created Part 32 beginning September 3, 2019.  The Honorable Kenneth L. Thompson will handle the Alternative Dispute Resolution (“ADR”) component.

Go

Commercial Division Prevents End-Run Around Rule Precluding Judicial Dissolution of Foreign Business Entities

In Matter of Raharney Capital, LLC v. Capital Stack LLC, the First Department held that New York courts lack subject matter jurisdiction over foreign company dissolution proceedings. Now, a recent Commercial Division decision rendered by Justice Saliann Scarpulla, Rosania v. Gluck, has clarified that the Raharney rule also applies to litigants’ attempts to obtain equitable relief associated with a judicial dissolution of a foreign business.

Go

First Department Confirms Award of Attorney’s Fees, But Vacates Damages Award for Counterclaim as Non-Arbitrable

On July 2, 2019, the First Department, in a unanimous decision written by Justice Dianne T. Renwick, reversed a decision of former Commercial Division Justice Eileen Bransten confirming an arbitration award.  The First Department concluded that the arbitrator’s award of attorney’s fees was not in manifest disregard of New York law, but that the arbitrator did not have jurisdiction over counterclaims brought by a related-third-party pursuant to an agreement that did not contain an arbitration clause.   The opinion provides a helpful review of New York law regarding both the award of attorney’s fees in arbitration and on jurisdictional objections to arbitration.

Go

The First Department Rules that Plaintiff Failed to Allege an Actionable Fiduciary Duty Claim

Last month, the First Department in Madison Sullivan Partners LLC v. PMG Sullivan St., LLC, 2019 N.Y. Slip Op. 04460 (June 6, 2019), affirmed the decision of former Commercial Division Justice Shirley Werner Kornreich that the Plaintiff in a LLC dispute failed to sufficiently allege a breach of fiduciary duty claim. The case concerned the parties’ relationship in a joint venture to develop Manhattan real estate as a mixed use project that was formed using several LLCs.  In a detailed amended complaint, the Plaintiff alleged that Defendants collected monthly sums for work on a construction project for the venture, when Defendants were not actually working on the construction project but instead pursuing their own ventures.  

Go

Commercial Division Advisory Council Highlights the Benefits of the Commercial Division to the State of New York

The Commercial Division Advisory Council recently released a memorandum describing the benefits that the Commercial Division offers to the State of New York.  The memorandum highlights the many advantages of having a dedicated business court for the state and business and legal communities.   It is worth a read for any lawyer whose practice focuses on business disputes.

Go

Commercial Division Asserts its Role in Securities Litigation

In Hoffman v. AT&T Inc., Justice Ostrager of the Commercial Division recently denied a motion to stay a securities class action in favor of a subsequently filed and more comprehensive action brought in the Southern District of New York (SDNY).  In doing so, he asserted the Commercial Division’s role in securities litigation following the U.S. Supreme Court’s decision in Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund, 138 S. Ct. 1061 (2018).    

Go

New York’s International Arbitration Center Hosts Welcome Reception for Commercial Division’s New International Arbitration Justice

On June 11, 2019, the New York International Arbitration Center (“NYIAC”) and members of New York’s international arbitration bar held a reception to welcome Justice Saliann Scarpulla of the New York County Commercial Division.  Earlier this year, Justice Scarpulla assumed responsibility for the Commercial Division’s specialized international arbitration part and, in that role, will hear all international arbitration matters coming before the Court.

Go

Appellate Division Holds that Arbitrator Has Power to Dissolve Partnership

In Matter of Capital Enterprises Co. v. Dworman, the Appellate Division, the First Department held that an arbitrator has broad discretion to order the dissolution of a New York general partnership, so long as the issue of dissolution was within the scope of the arbitration clause and the question of whether to dissolve the partnership was properly before the arbitrator.  In so doing, the First Department affirmed an order issued by Commercial Division Justice Jennifer G. Schecter which confirmed an arbitration award that had ordered a dissolution of a partnership.

Go

Commercial Division Justices Gather to Discuss Motion Practice

On Wednesday June 5, 2019, all eight of the New York County Commercial Division justices participated on a panel for the New York State Bar Association’s Commercial and Federal Litigation Section on “Motion Practice Before the Commercial Division.”  Motion practice is one of the most frequently used aspects of practice in the Commercial Division.  The format was an informal question and answer session on motion practice, moderated by the Section’s Past Chair, Robert Holtzman.

Go

Commercial Division Holds That Electronic Communications Between Out-of-State Defendant and New York-Based Company Can Support the Exercise of Personal Jurisdiction Over Defendants in New York

In High Street Capital Partners, LLC v. ICC Holdings, LLC, Justice Joel M. Cohen of the Commercial Division denied defendants ICC Holdings, LLC (“ICC”) and related entities’ (collectively, “Defendants”) motion to dismiss plaintiff High Street Capital Partners, LLC’s (“High Street”) action for breach of contract for lack of personal jurisdiction and forum non conveniens.  The court’s decision addressed issues of whether electronic communications between an out-of-state defendant and a New York-based company are sufficient to satisfy the requirements of New York’s long-arm statute and render New York a convenient forum.

Go

Sharply Divided Court of Appeals Upholds Waiver of Declaratory Relief by Commercial Tenants

In a closely watched appeal, the Court of Appeals affirmed by a 4-3 vote that a waiver contained in a commercial lease of the right to bring a declaratory judgment action is enforceable and not contrary to public policy.  The case, 159 MP Corp. v. Redbridge Bedford, LLC, No. 26, was not brought in the Commercial Division, but will have a significant impact on the drafting and enforcement of commercial leases.

Go

New York Announces Statewide “Presumptive” Alternative Dispute Resolution Program

On May 14, 2019, the New York State Unified Court System announced that it will begin rollout and implementation of a “presumptive” alternative dispute resolution (“ADR”) program.[1]  Under the new program, parties in civil cases will be referred to either mediation or some other form of ADR as an initial step for most lawsuits filed in New York State courts.  The “presumptive” ADR program will apply to a broad range of civil cases, including commercial disputes.

Go

Commercial Division Decision Applies Issues Frequently Considered on Motions to Dismiss

In considering a motion to dismiss related to a real estate development joint-venture gone bad, a recent decision by Justice Andrea Masley in 3P-733, LLC v Davis (No. 650800/2018 [N.Y. Sup. Ct., N.Y. Cty., April 2, 2019]) highlights several issues that frequently arise at the motion to dismiss stage in the Commercial Division.

Go

The First Department Reconsiders Approval of a Class Action Settlement

On April 11, 2019, the First Department unanimously affirmed a decision issued by Justice Shirley Werner Kornreich, formerly of the Commercial Division, which denied the plaintiffs’ motion for final approval of a class action settlement in City Trading Fund v. Nye (2019 NY Slip Op 02789). This was the second time the Appellate Division had considered Justice Kornreich’s denial of approval of a settlement in this case, having reversed her prior denial of preliminary approval of the settlement in November 2016 and remanding the case for a fairness hearing in order to review the settlement terms.

Go

Commercial Division Decision Illustrates Potential Issues that May Arise in CPLR Article 52 Turnover Order Proceedings

A party seeking to enforce a judgment against an asset of a judgment debtor that is held by a third party may petition for a turnover order through a special proceeding provided for by CPLR Article 52.  Justice Saliann Scarpulla’s recent decision in The Wimbledon Fund, SPC (Class TT) v. Weston Capital Partners Master Fund II, LTD (Wimbledon) illustrates several of the potential issues that may arise during such a proceeding.

Go

Commercial Division Is Coming to the Bronx

At her annual State of the Judiciary speech held on February 26, 2019 at Bronx County Supreme Court, Chief Judge Janet DiFiore announced that the Commercial Division will be expanding to Bronx County, effective April 1, 2019.  The Chief Judge explained that this expansion was in recognition of the Bronx’s ongoing economic resurgence and the growing number of commercial cases being filed there.  There has not yet been any announcement as to the jurisdiction of this new part or which judges will be assigned to it.  

Go

Commercial Litigation Update: First Department Drops Down to Four-Justice Panels for Arguments

Beginning in April 2019, the First Department has changed its practice to assign panels of four justices for oral argument, as opposed to five justices as has been the traditional practice of the court.  This change is the result of three ongoing vacancies on the First Department that have remained unfilled by Governor Cuomo.  The Presiding Justice of the First Department, Hon. Rolando Acosta, explained that the move to four justice panels is necessary because there are not enough judges to hear all the pending appeals.  Aware that four justice panels could create a two-to-two split, Presiding Justice Acosta explained that a fifth judge can be brought in to issue a decision if needed.  Parties can preserve their right to reargue or submit the case to a fifth justice by making a statement on the oral argument record.  This change will likely remain in place until new judges are appointed to the court. 

Go

Commercial Division Dismisses Most Claims in Dispute Over Russian Oil Company

In Magomedov et al. v. Lebedev et al., an opinion dated February 19, 2019, Justice Saliann Scarpulla of the Commercial Division dismissed most claims related to a Russian oil joint venture as time-barred under the statute of limitations.  The case also raises the issue of waiver of personal jurisdiction by bringing related lawsuits within New York.

Go

Commercial Division: Past, Present and Future - New York City Bar Association Program

On Monday February 26, 2019, four retired Justices of the Commercial Division, New York County – Justices Ellen Bransten, Shirley Kornreich, Charles Ramos, and Melvin Schweitzer – took the stage at the New York City Bar to discuss the past, present and future of the Commercial Division, as well as their own experiences on the court.  The discussion was moderated by retired Justice Carolyn Demarest of the Commercial Division, Kings County. 

Go

New Justice Assigned to Hear Commercial Division’s International Arbitration Matters

Following Justice Charles Ramos’s retirement from the Commercial Division at the end of last year, commercial practitioners have awaited an announcement reallocating responsibility for the Division’s international arbitration matters.  Since 2013, all international arbitration cases filed in the Commercial Division—including those arising under CPLR Article 75 and the Federal Arbitration Act, 9 U.S.C. § 1 et seq.—had been assigned to Justice Ramos as part of an effort to establish a dedicated part specializing in the international arbitration field.

Go

Non-Party to Arbitration Agreement Successfully Petitions the Commercial Division to Avoid Being Compelled to Join Arbitration

Arbitration is a matter of contract and, as such, non-parties generally cannot be compelled to arbitrate under agreements that they have not signed or agreed to.  In IQVIA RDS Inc. v. Eisai Co. Ltd., the Commercial Division recently highlighted two exceptions to this general rule.  Although the Court ultimately found neither exception to be applicable, the case raises important issues that merit attention.

Go

Commercial Division Amends Rule 3 to Encourage Mediation

On December 5, 2018, New York’s Chief Administrative Judge, Lawrence K. Marks, issued an administrative order amending Commercial Division Rule 3(a), which addresses alternative dispute resolution (“ADR”).[1]  This new amendment encourages opposing counsel to work together to select a mediator for commercial cases, including by consulting rosters of neutral mediators provided by Commercial Division courts. 

Go

Corporate Officer Escapes Corporate-Capacity Fraud Claims in Alleged Ponzi Scheme Case in Commercial Division

Coast-to-Coast-Energy-Inc-v-Ga.pdfIn corporate fraud suits, it is common for plaintiffs to file claims against executives in their capacity as corporate officers.  However, to succeed on a corporate-capacity claim, a plaintiff must be able to show that the corporate veil should be pierced so as to hold an officer personally liable for the corporation’s legal obligations.  This issue is illustrated by the Commercial Division’s recent decision in Coast to Coast Energy, Inc. v. Gasarch.

Go

A Fond Farewell to Two of the Commercial Division’s Most Senior Judges

The arrival of the new year is a bittersweet time for the Commercial Division as it bids farewell to two of its most senior judges: Justice Charles E. Ramos and Justice Eileen Bransten.  Notably, both will be staying on to serve the Court as Judicial Hearing Officers.

Go

First Department Holds that Declaratory Judgment Against Creditor’s Principal Does not Preclude Claims By the Creditor Itself

Can a debtor obtain declaratory judgment shielding himself from liability to a creditor’s officers or associates personally and then use that judgment to preclude subsequent claims by the creditor itself?  Not in the First Department, following the recent decision in Avilon Automotive Group v. Leontiev.[i]  In Avilon, a unanimous panel reversed the res judicata-based dismissal of fraudulent transfer and other related claims arising from several Russian loan transactions because the claims by the creditors themselves were not the subject of a prior declaratory judgment concerning the debtor’s liability to the creditors’ representative.Avilon_Auto._Grp._v._Leontiev.pdf

Go

Under New York Law, an Accounting Does Not Equal a Books and Records Inspection

A recent case out of the New York Commercial Division demonstrates that the remedy of an accounting can be confused with the right of a shareholder or LLC member to inspect books and records.  In Atlantis Management Group II LLC v. Nabe, Index No. 651598/2017, 2018 BL 366555, at *4–5 (Sup. Ct., N.Y. Cty. Oct. 1, 2018), Justice Saliann Scarpulla granted partial summary judgment on the plaintiff’s claim for an accounting.  Nonetheless, in accordance with the plaintiff’s request for relief, the Court only ordered that the defendants turn over existing books and records.

Go

Commercial Division Issues Verdict for Plaintiffs Following Bench Trial in Family Feud Over the Palm Restaurant

On November 13, 2018, Justice Masley issued a decision following a bench trial in Ganzi v. Ganzi,[1] which concerns a family feud over the Palm Restaurant empire.  Ganzi provides a vivid illustration of the importance of observing corporate formalities, the need to be vigilant for self-dealing when shareholders hold ownership interests in multiple intertwined businesses, and, of course, the pitfalls of mixing family and business.

Go

Two New Justices Appointed to the Commercial Division

Commercial Division practitioners have had their eye on upcoming vacancies on the Division’s bench for some time.  As we have reported in the past, two new justices, Hon. Andrea Masley and Hon. Jennifer G. Schecter, joined the Division in the last year.  The Bar has been eagerly awaiting word as to who would fill two additional vacancies that will open up at the end of this year.

Go

Commercial Division Holds that Failure to Request Rationale for Arbitration Award Makes It Virtually Unreviewable on Manifest Disregard Ground

Parties to arbitration proceedings at times decide to forego a written decision by the arbitration panel explaining the basis for their arbitration award.  While doing so may reduce the costs of arbitration and can provide other strategic advantages, it also makes it more likely that the Commercial Division will find the award unreviewable.  This point is exemplified by the recent decision by Justice Charles E. Ramos of the Commercial Division in NSB Advisors, LLC v. C.L. King & Associates, Inc.

Go

Compelling Arbitration under CPLR § 7503(a): Timing Matters

To commence a special proceeding to compel arbitration in New York, pursuant to CPLR § 7503(a), a party must be “aggrieved by the failure of another to arbitrate.”  In KPMG LLP v. Kirschner, Justice Barry R. Ostrager recently ruled that to be “aggrieved,” and thereby have standing, a party must be subject to litigation before filing a special proceeding to compel arbitration.  According to the Court, a subsequently filed litigation or the risk of potential litigation is not sufficient to confer standing. 

Go

The Commercial Division Is Rolling Out Cutting-Edge Courtroom Technology

As was recently reported in the New York Law Journal, New York is investing in courtroom technology for the Commercial Division in order to keep up with the demands of commercial trials.  These efforts are designed to make trials more cost-effective and efficient for litigants, as well as easier for the judges and jurors to follow. 

Go

First Department Reverses Against Ending Fuji-Xerox Merger

On October 16, 2018, the Appellate Division, First Department lifted several injunctions granted by the Commercial Division that had restrained a proposed merger deal between Xerox and Fujifilm (“Fuji”), and dismissed the Xerox shareholders’ actions against Fuji.[1]

Go

Commercial Division Holds That Fiduciary Duties Limit LLC Majority Members’ Ability to Adopt Amendments Aimed at Freezing Out Minority Members

Many LLC operating agreements expressly require the consent of all members to adopt or amend the operating agreement.  However, some LLC operating agreements do not contain such provision, and instead simply require the consent of members holding a majority of the member interests.  But such agreements do not simply allow majority members to make any amendments that they may see fit, as shown by the Commercial Division’s recent decision in Yu v. Guard Hill Estates, LLC.[1] There, Justice Scarpulla explained that even amendments expressly authorized by an operating agreement can still give rise to breach of fiduciary duty claims if they are adopted for an illegitimate purpose.

Go

Release from the 1970s Forecloses Family’s Suit to Reclaim Art Lost During the Holocaust

So ruled Justice Andrea Masley of the Commercial Division in a recent summary judgment motion in the case Frenk v. Solomon, Index No. 650298/2013, holding that a standardized form release signed by the plaintiff’s mother in 1973 to settle a case primarily involving one piece of artwork barred the plaintiff’s present suit to recover other pieces of art that were believed lost at the time of the 1973 settlement.

Go

Commercial Division Holds That Venue Is Proper Even Though Plaintiff Is Wrong About Defendants' Residence

In 2017, the New York legislature amended CPLR 503(a) to provide for venue in “[(1)] the county in which one of the parties resided when it was commenced; [(2)] the county in which a substantial part of the events or omissions giving rise to the claim occurred; or, [(3)] if none of the parties then resided in the state, in any county designated by the plaintiff.”   Before the amendment, CPLR 503(a) did not provide for venue based on where the events or omissions giving rise to the claim occurred.

Go

First Department Rules that Arbitrators Did Not Manifestly Disregard the Law and Confirms Arbitration Award

On September 27, 2018, in a widely followed arbitration case, a unanimous panel of the Appellate Division, First Department concluded that the New York County, Commercial Division (Ramos, J.) erred when it partially vacated an arbitration award on the ground that the arbitrators’ disregarded the law.  As a result, the Appellate Division confirmed the arbitration award. [1]

Go

Appellate Divisions Adopt Statewide Appellate Practice Rules

On September 17, 2018, new statewide appellate practice rules took effect in an effort to harmonize the procedures governing appeals to New York’s four Appellate Divisions.  Prior to the adoption of these new rules, the procedural aspects of appeals were governed by individual rules unique to each Appellate Division, which resulted in some significant differences in practice between these appeals courts. 

Go

New Commercial Division Rule Encourages Pre-Trial Evidentiary Hearings or Immediate Trial on Dispositive Issues

On July 25, 2018, Chief Administrative Judge of the Courts, Lawrence K. Marks, issued an administrative order promulgating Rule 9-a of the Commercial Division Rules. See 22 N.Y.C.R.R. 202.70.  The Rule, entitled “Immediate Trial or Pre-Trial Evidentiary Hearing,” encourages parties to move for a pre-trial evidentiary hearing or immediate trial on factual issues that could resolve a material part of the case. 

Go

Commercial Division Finds Foreign Corporations Lack Sufficient Contacts with New York for Personal Jurisdiction

On July 5, 2018, Justice Saliann Scarpulla of the Commercial Division granted a motion to dismiss by All Nippon Airways, Co. Ltd., ANA Aircraft Technics, Co., Ltd., ANA Base Maintenance Technics, Co., Ltd., ANA Holdings, Inc., and All Nippon Airways Co., Ltd. (collectively “ANA”) in Kyowa Seni, Co. v. ANA Aircraft Technics Co.[i], ruling that the Court lacked both general and specific jurisdiction over ANA.

Go

The Commercial Division Gets a New Rule on Technology-Assisted Review in Discovery

On July 19, 2018, Chief Administrative Judge of the Courts, Lawrence K. Marks, issued an administrative order promulgating a new subdivision of Rule 11-e of the Commercial Division Rules. Rule 11-e governs Responses and Objections to Document Requests, and the newly added subdivision specifically addresses the use of technology-assisted review in the discovery process. 

Go

Court Denies Attachment in Case Involving Exiled Chinese Billionaire Guo Wengui

Since high net worth individuals often operate and own assets through LLCs and other business entities, including foreign corporate entities, a plaintiff must satisfy the requirements of a veil-piercing claim in order to attach assets owned by such entities.  Failing to do so could frustrate a plaintiff’s ability to satisfy a judgment, as illustrated by Commercial Division Justice Barry Ostrager’s recent decision in Pacific Alliance Asia Opportunity Fund L.P. v. Kwok Ho Wan.

Go

Alter Ego Claim Survives Pre-Answer Motion to Dismiss on an Equitable Ownership Theory

On July 2, 2018, Justice Barry R. Ostrager of the Commercial Division denied a motion to dismiss by UMG Recordings, Inc. (“Universal”), an alter ego theory of liability against it in Aspire Music Group, LLC v. Cash Money Records, Inc., concluding that Aspire sufficiently alleged that Universal was the equitable owner of Cash Money to survive the pre-answer motion to dismiss.

Go

Commercial Division Finds Jurisdiction over Foreign Defendant on an Alter Ego Theory in Estate’s Action to Recover Painting Plundered in Nazi-Occupied France

In a decision issued last month in Gowen v. Helly Nahmad Gallery, Inc., No. 650646/2014, 2018 NY Slip Op 28142, 2018 BL 164601, Commercial Division Justice Eileen Bransten found personal jurisdiction over foreign defendants in an action brought by the estate of a Jewish art dealer to recover a valuable painting plundered by the Nazis in occupied Paris.  Justice Bransten further held that New York’s substantive law applies to the dispute over the painting’s ownership, proclaiming that “New York markets are not now, and shall not become, a safe harbor for the fruits of property pillaged during the course of the Nazi genocide.”  Beyond its compelling subject matter, the opinion provides useful guidance for plaintiffs considering pleading jurisdiction over non-domiciliary defendants on an alter ego theory.

Go

Patterson Belknap Hosts Conversation about Litigation Practice in New York Courts with Court of Appeals Judge Michael Garcia and New York Practice author Professor Patrick M. Connors

On Wednesday, June 20, 2018, Patterson Belknap Webb & Tyler LLP welcomed Associate Judge Michael Garcia of the New York Court of Appeals, and Professor Patrick M. Connors, author of the New York Practice treatise, for a continuing legal education program on litigation practice in New York courts. Patterson Belknap partners Stephen P. Younger and Muhammad U. Faridi, authors of the New York Commercial Division Practice Guide, also participated with Mr. Younger moderating a discussion of New York practice issues and Mr. Faridi serving as a panelist.

Go

Broadway Producers Denied Motion to Set Aside Damages Verdict against Former Publicist

In Rebecca Broadway LP v. Thibodeau, Justice Andrea Masley of the Commercial Division denied plaintiff Rebecca Broadway Limited Partnership’s (“RBLP”) motion to set aside a damages verdict after it prevailed at trial against Defendant Marc Thibodeau (“Thibodeau”) on claims for breach of contract and tortious interference with business relationships.[1] The case raised issues of whether a jury’s damages verdict is supported by a rational interpretation of the trial evidence and the circumstances under which a retrial solely on the issue of damages is appropriate.

Go

Commercial Division Allows Stockholder Challenge to Merger to Proceed Due to Allegations that the Special Committee Had a Conflict of Interest

On May 9, 2018, Judge Barry R. Ostrager of the Commercial Division denied a motion to dismiss a shareholder complaint in the Matter of Handy & Harman Ltd. Stockholder Litig., No. 654747/2017, 2018 BL 172083 (Sup. Ct. May 9, 2018), concluding that a plaintiff shareholder had sufficiently alleged that the Board’s Special Committee was conflicted when it recommended a merger transaction.[i]

Go

Unfair Competition and Trade Secrets Damages Limited to Plaintiff’s Losses Under New York Law

When a defendant avoids the cost of developing its own technology by stealing proprietary information, can that defendant be required to re-pay the cost it saved as compensatory damages?  Not under New York trade secret or unfair competition law.  In E.J. Brooks Co. v. Cambridge Security Seals,[1] a divided New York Court of Appeals announced – over a lively dissent – that compensatory damages for misappropriation of trade secrets and unfair competition are limited to the plaintiff’s own losses, and may not include the development costs avoided by defendants.  The Court further held that an accompanying claim for unjust enrichment does not provide a basis to expand the recovery beyond the plaintiff’s own losses.

Go