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Suffolk County Historical Society (SCHS), through the cooperation of the Suffolk County Court Administrative Judge Randall Hinrichs, is pleased to announce that SCHS will be celebrating women from New York State who have left an indelible mark on the court system. A Photography Portrait Exhibition will be displayed at Touro Law Center in honor of Women’s History Month. This exhibition was created by the Suffolk County Judicial Women in the Courts and the Suffolk County Historical Society.

An opening reception will be held at Touro Law Center
Monday, March 10, 2014, 5:30-7:30 PM
225 Eastview Dr., Central Islip, NY

Honorees represented with images and biographies include:
· Hon. Judith Kaye – First Woman appointed to the N.Y.S Court of Appeals; First Woman chief Judge of the N.Y.S Court of Appeals
· Hon. Gail Prudenti – First Woman Presiding Justice, Appellate Division, 2nd Department *
· Hon. Birdie Amsterdam – First Woman elected to N.Y.S. Supreme Court
· Hon. Jane M. Bolin – First African-American Woman Judge in both N.Y.S. and the United States
· Sonia Sotomayor – First Latina Supreme Court Justice in the United States
· Kate Stoneman, Esq. – First Woman to pass the N.Y.S. Bar
· Charlotte Smallwood, Esq. – First Woman District Attorney elected in N.Y.S.
· Hon. Ruth Bader Ginsberg – First N.Y.S. Woman appointed to the U.S. Supreme Court
· Hon. Syrena Stackpole – First N.Y.S. Woman elected to public office*
· Judith Lewis Meggesto, Esq. – First female Native-American attorney in N.Y.S.

Suffolk County Firsts*:
· Christine Malafi, Esq. – First female Suffolk County Attorney *
· Hon. Catherine T. England – First female president of the Suffolk County Bar Association; First female justice to sit in Suffolk
County Supreme Court; First female judge to sit in Suffolk County Family Court.*
· Hon. Anne Mead – First female District Court judge in Suffolk County.*
· Hon. Mary M. Werner – First female District Administrative Judge in Suffolk County.*
· Valerie S. Manzo, Esq. – Co-founder and first president of Suffolk County Women’s Bar Association.*
· Rita Adler, Esq. – First female Assistant District Attorney in Suffolk County *
· Marguerite A. Smith, Esq. – First female Native-American attorney in Suffolk County (Shinnecock Nation.) *
· Patricia E. Salkin, Esq. – First female law school Dean in Suffolk County *

By Patrick McCormick

Who is responsible for the damages that result when a commercial sub-tenant holds over past the expiration of its term causing the tenant to incur damages under its lease? In what appears to be a case of first impression in the Second Department,

in PHH Mtge. Corp. v. Ferro, Kuba, Mangano, Sklyar, Gacovino Lake, P.C.1 the Appellate Division has confirmed that, with appropriate lease clauses, the sub-tenant is liable for the damages incurred by the tenant resulting from the sub-tenant’s failure timely to vacate the premises it occupied.

The facts in PHH are simple enough: Owner/Landlord leased certain premises to Tenant. Tenant sublet the entire premises to PHH. PHH then sub-sublet a portion of the premises to Sub-subtenant Ferro Kuba. The rent Ferro Kuba was obligated to pay to PHH was about one-half the amount of rent paid by PHH to the Tenant and about one-quarter the amount of rent paid by the Tenant to the Landlord. The Master Lease between the Landlord and the Tenant provided for holdover damages to be paid to the Landlord in the amount of one and one-half the amount of base rent for each month of the holdover. The Sublease between the Tenant and PHH and the Sub-sublease between PHH and Ferro Kuba each incorporated by reference all the terms of the Master Lease, which included the holdover damages clause.

The Master Lease, the Sublease and the Sub-sublease terms ended; Ferro Kuba failed to vacate the premises it occupied and held over for 25 days thus precluding PHH and, in turn, the Tenant, from tendering vacant possession of the entire demised premises to the Landlord. The Landlord sought holdover damages from Tenant who in turn sought those damages from PHH. PHH paid $60,489.17 in holdover damages and sought to recover those damages from Ferro Kuba. When Ferro Kuba refused to reimburse PHH for the damages it caused, PHH commenced an action in Supreme Court, Suffolk County, which ultimately denied PHH’s motion for summary judgment.

The Appellate Division, Second Department reversed and granted PHH judgment on liability and remitted the matter to Supreme Court “for a determination of the amount of the plaintiff’s liquidated damages, interest, and counsel fees pursuant to the terms of the master lease and sub-sublease.” The Appellate Division based its determination on the terms of the master lease and sub-sublease finding specifically that “As a sub-subtenant, the defendant had expressly agreed to be bound by all of the provisions and restriction in the master lease for the premises, which included the payment of liquidated damages in the event of a holdover occupancy of part or all of the premises. Therefore, based upon the provisions of the master lease and the sub-sublease, the defendant is liable for holdover damages for the entire leasehold premises during the period at issue.”

In response to Ferro Kuba’s claim that Landlord could have rented the vacant portion of the premises and that landlord may have accepted a surrender of a portion of the premises, the Appellate Division held, “In this regard, a lessor is under no duty to rearrange its leasing of space in a commercial building to mitigate the damages caused by a subtenant who holds over.”

This case points out that, from the tenant’s perspective, it is critical that any sublease incorporate relevant terms, especially those under which tenant may be found liable for damages, to ensure the tenant has a viable remedy against the subtenant for damages caused by its holding over. When representing the subtenant, counsel needs to make sure that, in the face of such “incorporation by reference” clauses, the subtenant is made aware of the potential exposure.

¹ 113 A.D.3d 831, 979 N.Y.S.2d 536 (2d Dep’t 2014).

By Scott Middleton, Esq.

In addition to being an attorney here on Long Island, I’m an avid CrossFit Athlete and have been participating in CrossFit for over 18 months now. The benefits from this type of fitness regime have had a tremendous impact on me: overall better fitness and nutrition, coupled with a sense of camaraderie among fellow CrossFitters and especially in one’s own gym. It has helped me both personally and professionally.

With the rising popularity of CrossFit here on Long Island and across the country it’s important to understand the risks to gyms and fitness centers that host these high intensity exercises. As a business owner or operator it is imperative to know how to protect yourself. Therefore, the question becomes how a CrossFit business can protect itself and its employees from potential lawsuits.

In New York, General Obligations Law §5 – 326 was enacted to prevent amusement parks and recreational facilities from enforcing exculpatory clauses printed on admission tickets or membership applications.

The cases that followed the enactment of §5 – 326 have focused on several factors to determine whether a facility is instructional or recreational, including: the organization’s name, its certificate of incorporation, its statement of purpose and whether the money charged is tuition or a fee for use of the facility. If training sessions are instructional in nature but are ancillary to the recreational activities offered by the facility, GOL §5 – 326 will apply in the waiver/release will be unenforceable as it will be considered to be against public policy.

Anyone who participates in a CrossFit, at a reputable facility knows that most offer rather strenuous but free introductory class. These are generally small and under the instruction of the coach/trainer. This is followed by the “on-ramp” where would be cross-fitters are introduced to many of the basic exercises, under the supervision and close instructional scrutiny of a trainer. Once you “graduate” from the “on-ramp” you’re ready (or maybe not) for regular CrossFit classes. During the short but grueling workouts, coaches are present to instruct on both basic and complex exercises. They continuously critique and teach.

The common thread here is that instruction is present throughout all aspects of CrossFit. The level of involvement of the coaches/trainers in continually correcting movements during the workout creates an atmosphere that is instructional and cannot be considered to be recreational or an ancillary service of a recreational facility. Thus, New York’s General Obligations Law §5 – 326 would not apply to CrossFit facilities and the waiver is completely enforceable. This affords CrossFit gyms a level of protection not present in “big box” gyms.

As a courtesy, I’d happily review your waivers to avoid making unnecessary mistakes in their enforceability.

Effective April 1, 2014, private sector New York City employers with five or more employees must provide paid sick time to all employees who work at least 80 hours in a calendar year.1

Accrual and Use
Mayor Bill de Blasio signed the City Council’s expanded sick leave bill earlier this year. The New York City Earned Sick Time Act (the “Act”) provides that these private sector employees will now earn up to 40 hours of paid sick time per year, accruing at a rate of one hour for every 30 hours worked. The Act covers both full-time and parttime workers.

Employees may use sick time for three purposes:

1. The employee’s mental or physical illness, injury or health condition or need for medical diagnosis, care or treatment of a mental or physical illness, injury or health condition or need for preventive medical care; and/or
2. Care of a family member2 who needs medical diagnosis, care or treatment of a mental or physical illness, injury or health condition or who needs preventive medical care; and/or
3. Closure of the employee’s place of business by order of a public official due to a public health emergency or such employee’s need to care for a child whose school or childcare provider has been closed by order of a public official due to a public health emergency.

Employees will begin accruing sick time at the start of employment or on April 1, 2014, whichever is later, but cannot begin using the sick time until July 30, 2014 or 120 days after the start of employment, whichever is later.

Unused sick time carries over to the following year, but the Act does not require employers to offer more than 40 hours of paid sick time to an employee per year. The Act does not require any payment to employees for accrued but unused sick time.

Notice and Documentation by Employees
An employer may require reasonable notice from the employee of the need to use sick time. When the need to use sick time is foreseeable, an employee may be required to provide notice of up to seven days; when the need is unforeseeable, an employee may be required to provide notice to the employer as soon as is practicable. An employer may require documentation signed by a licensed health care provider, but only for absences of three or more consecutive work days. The Act restricts employers from seeking information about the nature of the illness or absence.

Employer Obligations
Employers who provide sick leave must provide a Notice to new employees when they begin employment and to existing employees by May 1, 2014. (A copy of the Notice prepared by the New York City Department of Consumer Affairs can be accessed at http://www.nyc.gov/html/dca/downloads/pdf/Mand atoryNotice.pdf.) The Notice describes the accrual and use of sick time, defines the employer’s “calendar year,” and advises employees of their right to be free from retaliation for using sick time and the right to file a complaint with the Department of Consumer Affairs in connection with violations of the Act.  in English and any other primary language spoken by the employee, if the Department has posted a form in that language on its website (the Department plans to provide the Notice in Spanish, Chinese, French-Creole, Italian, Korean, and Russian).

Employers must maintain sick-time compliance records for at least three years.

Next Steps
Employers with New York City locations who already offer paid leave that can be used as sick time should evaluate their existing policies and update them to comply with the Act’s requirements. Those employers whose existing policies do not comply with the Act must draft new policies that meet the minimum requirements of the Act.

Please contact us with questions and for guidance in ensuring your company’s policies comply with the new legislation.

1 The Act does not cover independent contractors, work-study students, government employees, and certain hourly physical, speech, and occupational therapists. In addition, union agreements in certain industries may opt their workers out of the Act. Domestic workers are also subject to different regulations.

2 A “family member” is defined as an employee’s child, spouse, domestic partner, parent, sibling, grandchild or grandparent, or the child or parent of an employee’s spouse or domestic partner.

By Patrick McCormick

There have been several interesting Appellate Court decisions in the past couple of months touching on a variety of issues. Cases discussing actual partial eviction, successor landlord liability and a tenant’s failure to timely cure an alleged default are discussed below.

In Croxton Collaborative Architects, P.C. v. T-C 475 Fifth Avenue, LLC,1 a commercial tenant sued its successor landlord alleging it was damaged because defendant landlord failed to remediate the “derelict” and “war-torn appearance” of the premises, which was caused by renovation work commenced by the prior landlord, in breach of the lease. Plaintiff commenced the action approximately five months after defendant bought the premises and assumed the lease. The Appellate Division reversed the lower court’s denial on landlord’s motion to dismiss the complaint.

The Court noted that lease paragraph 22.01 provided that “in the event of a transfer of title, the lease shall be deemed to run with the land and the transferee agrees to ‘assume’ and ‘carry out any and all such covenants, obligations and liabilities of Landlord hereunder.” Plaintiff apparently relied upon this lease provision to hold the new landlord liable for the conditions caused by the prior landlord. However, the Court relied upon lease paragraph 25.03 which it found “unequivocally provides that ‘under no circumstances shall the [lessor] . . . be (a) liable for any act, omission or default of any prior landlord; or (b) subject to any offsets, claims or defenses which [t]enant might have against the prior landlord.’” In finding that lease section 25.03 “trumps” section 22.01, the Court noted that section 25.03 was prefaced by stating “[a]nything herein contained to the contrary notwithstanding.”

While the Court did not engage in any detailed analysis, the lesson is clear—when representing purchasers, upon review of the existing leases to be assumed by the purchaser, counsel should look for exculpatory language similar to the language used in section 25.03 in this case. If such language does not exist, purchaser should be advised and cautioned that it could be liable for the acts or inaction of prior landlords and that an agreement by the prior landlord to indemnify purchaser for such claims may be warranted.

In a very brief decision in Darwin Management LLC v. Avenue C Food Corp.,2 the Appellate Term reminds tenants of the need to timely cure alleged defaults. In Darwin, landlord served a cure notice alleging tenant defaulted under the terms of the lease by installing an ATM outside the mixed-use premises. Tenant did not cure the alleged default until two weeks after the deadline set in the landlord’s cure notice.

In reversing the judgment of the lower court entered after a non-jury trial to dismiss the holdover petition, the Appellate Term held simply that “[t]he commercial lease terminated upon tenant’s failure to cure [citation omitted] and the court was without power to revive the terminated lease [citation omitted].” Simply stated, in the face of a default or cure notice, the tenant needs to unequivocally and timely cure the alleged default or timely obtain a Yellowstone injunction to toll the running of the cure period pending a determination of whether the tenant is in fact in default as alleged. The failure to cure or toll the cure period can result in the loss of possession of the demised premises.

Finally, the Appellate Term in Paris Lic Realty, LLC v. Vertex, LLC3 addressed a defense of actual partial eviction asserted by a tenant in a commercial nonpayment proceeding. The lease in question described the demised premises as “approximately 4,000 square feet on the third floor (including areas of the elevator and stairways).” Based on this description, the tenant cleverly argued it was ousted from part of the demised premises because it was not able to use the elevator for “extended periods of time during building construction.” The Appellate Term held that even if the elevator was part of the demised premises, there could be no actual partial eviction because the lease provided that there shall not be “any abatement or diminution of rent because of making repairs, improvements or decoration to the demised premises after the date for the commencement of the term.” If the lease did not contain this abatement provision, would the tenant have prevailed based on the description of the demised premises to include the elevator?

¹ —N.Y.S.2d —, 2014 N.Y. Slip Op. 00279 (1st Dep’t 2014)
² 42 Misc.3d 132(A), 2013 N.Y. Slip Op. 52233(U) (App. Term 1st Dep’t 2013)
³ 41 Misc.3d 145(A), 2013 N.Y. Slip Op. 52074(U) (App. Term 2d Dep’t 2013)

By Patrick McCormick

In a decision dated November 13, 2013, the Appellate Division, Second Department decided a case involving a contractor, Matell Contracting Co., Inc., who performed work for a commercial tenant, attempting to enforce a mechanic’s lien against the owner of property, Fleetwood Park Development Co. 1

Fleetwood leased certain property to a new tenant and, pursuant to an agreement with the new tenant, permitted the tenant to renovate the leased property for use as a supermarket. The tenant retained Matell Contracting as general contractor. The tenant failed to pay $1,800,000 allegedly due for work performed by Matell and Matell filed a mechanic’s lien against the property. Matell then commenced an action to foreclose the mechanic’s lien against, inter alia, Fleetwood Park. Fleetwood asserted several affirmative defenses including that it did not consent to the subject work. Matell moved for summary judgment on the complaint on the ground that Fleetwood consented to the work and to dismiss several affirmative defenses asserted by Fleetwood Park. The Supreme Court denied the motion and Matell appealed.

In affirming that portion of the order denying Matell’s motion for summary judgment on the complaint and to dismiss the affirmative defense relating to consent, the Appellate Division examined the knowledge required of an owner before the owner will be liable for work performed for a tenant. The Appellate Division confirmed that Matell “presented evidence showing that Fleetwood Park had knowledge of, and acquiesced in, the work performed to convert the leased property into a supermarket . . .” But, of primary importance, the Appellate Division determined that Matell nevertheless failed to make a prima facie showing that Fleetwood Park actually affirmatively consented to the subject work. The Court confirmed the distinction between the situation where an owner has simply approved or agreed that the work be performed and where the owner affirmatively gave consent for the specific work directly to the contractor. It is this specific consent by the owner directly to the contractor that is required to be proved by a contractor attempting to hold an owner liable in connection with the foreclosure of a mechanic’s lien.

The second appellate decision comes from the Appellate Term in New World Mall, LLC v. New World Food Court, Inc2. and addresses whether a sublease is subject to a conditional limitation clause contained in a master lease.

The facts in New World are straightforward. Sublessor alleged that the sublease terminated following its service of a 10-day default notice on subtenant alleging nonpayment of late charges and electric charges. Sublessor alleged that it had the right to terminate the sublease because the sublease incorporated by reference all the terms of the master lease including the conditional limitation clause contained in the master lease. It should be noted that this type of incorporating by reference language is typical in subleases. The master lease required the tenant (sublessor) to pay certain “Minimum Rent” in the amount of $2,500,000 annually commencing on a specified date and “Interim Rent” of $60,000 per month before that specified commencement date. In contract, the sublease provided for the payment of “Basic Rent” of $110,000 per month for the first three years of the sublease plus other charges specifically designated as additional rents. The sublease did not contain a conditional limitation provision for a default in paying the Basic Rent or the additional rents.

The conditional limitation clause contained in the master lease provided that a default occurs: “If Tenant shall fail to pay (a) any Interim Rent or Minimum Rent when the same shall become due and payable, and such failure shall continue for ten (10) days after Landlord shall give notice of the failure to Tenant, or (b) any other charge required to be paid by Tenant hereunder, when the same shall become due and payable, and such failure shall continue for thirty (30) days after Landlord shall give notice of the failure to Tenant.” Despite the fact that the sublease incorporated by reference “the terms, covenants, conditions and other provisions” of the master lease, the Appellate Term determined that the default provision of the master lease “is not subject to incorporation into the sublease . . .”

The Court’s rationale was quite simple: the default clause in the master lease referenced defaults in payment of rent due under the master lease-specifically “Interim Rent” and “Minimum Rent.” The Court held that those terms had no “application” to the amounts due under the sublease “which are defined in other terms.” While somewhat troubling, the remedy is simple-either the terms, definitions and relevant default clauses in a sublease should mirror the same terms, definitions and clauses used in the master lease or, instead of taking the easy way out by simply incorporating the master lease into a sublease by reference, the sublease should contain any relevant or necessary term as if it were a stand-alone document.

1 Matell Contracting Co., Inc., v. Fleetwood Park Development, LLC, 2013 WL 5989744 (2d Dep’t 2013)
2 2013 WL 6098424 (App. Term 2d Dep’t 2013)

By Patrick McCormick

Three recent appellate decisions, each sparse on fact, nevertheless remind us of the relevance of well settled legal principles and confirm the proof required to prevail on each.The first, Tewksbury Management Group, LLC v. Rogers Investments NV LP¹, involves application of the doctrine of res judicata; the second, Bonacasa Realty Company, LLC v. Salvatore², discusses the concept of piercing the corporate veil; and the third, MH Residential 1, LLC MH v. Barrett³, inter alia, discovery.

In Tewksbury, the commercial tenant commenced an action against its landlord claiming landlord breached the lease by failing to obtain a valid certificate of occupancy, remove building violations that allegedly interfered with tenant’s use of the premises, to provide heat and to deliver possession of the entire premises. By order entered April 19, 2012, the Supreme Court granted landlord’s motion to dismiss the complaint.

As it turns out, several years earlier in 2008, landlord commenced a nonpayment proceeding against tenant. That proceeding ended with a consent judgment of possession and judgment for rent arrears. In affirming the dismissal of tenant’s claims upon the doctrine of res judicata, the Appellate Division held that tenant’s claims were “inextricably intertwined with defendant’s claims in the summary proceeding” and could have been raised by tenant in that summary proceeding. Obviously, tenant’s claims, if proved, would have provided a defense to landlord’s claims for possession and rent. Having failed to raise the claims in the summary proceeding and, more importantly, having consented to a judgment for rent arrears and possession, tenant necessarily acknowledged rent was owed, thus precluding its claim that landlord breached the lease. If you represent a tenant and have claims that could provide a defense to a claim of nonpayment and that would also result in an award of damages, the claim must be raised in the summary proceeding or it may be forever lost.

In Bonacasa, tenant vacated the demised premises prior to the expiration of the lease. Landlord thereafter commenced an action against the corporate tenant for rent due and owing and also asserted claims against the corporation’s principal. Landlord alleged that the corporation was a sham corporation “formed solely for the purpose of leasing the premises” and the individual defendant exercised dominion and control over the corporation and thus sought to pierce the corporate veil. In affirming the dismissal of the claim against the individual defendant, the Appellate Division found the evidence supported the finding that the individual “executed the lease in his corporate capacity as a principal of [the corporate tenant] and that he did not exercise dominion and control over [the corporation] to commit a wrong or injustice against the plaintiff.” The Court further found that “a simple breach of contract, without more, does not constitute a fraud or wrong warranting the piercing of the corporate veil.”

Finally, MH Residential 1, LLC, involved protracted residential holdover proceedings. Tenants filed two motions for leave to conduct various discovery. In affirming the denial of the first motion, the Appellate Term noted that the motion was made eleven months after an unappealed order denied a prior motion for similar relief and tenant had not shown a “material change in circumstances.” As for the second motion, the Court determined movant had not demonstrated “ample need” for the discovery sought. These standards for obtaining discovery are well known, but need to be remembered as litigation progresses.

¹ 2013 WL 5712338, ___N.Y.S.2d___ (1st Dep’t 2013)
² 109 A.D.3d 946, 972 N.Y.S.2d 84 (2d Dep’t 2013)
³ 41 Misc.3d 24,___N.Y.S.2d___(App. Term 1st Dep’t 2013)

December 2, 2015

Tax Update
Presented by Robert Quarté, CPA

As 2015 draws to a close, join us to learn year-end tax tips and strategies that will help you minimize any tax season surprises and start your business off on the right foot for  2016. Robert Quarté of Albrecht, Viggiano, Zureck & Company, P.C. (AVZ) will share strategies on individual, business, and retirement planning, the Affordable Care Act, filing deadlines changes, FBAR’s and college savings plans.  With the new year upon us, now is the perfect time to get your business in order and plan for a successful new year.

EVENT DETAILS:

8:30am – 9:00am
Arrival and Breakfast

9:00am – 9:45am
Presenting Speaker

9:45am – 10:00am
Q&A and Discussion

REGISTRATION: All events are FREE but registration is required. Complimentary breakfast will be served.

LOCATION: CMM’s Ronkonkoma office, 4175 Veterans Memorial Highway, Ronkonkoma.