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Arguably the hardest-working man in Long Island innovation, former New York State Assemblyman Marc Alessi enjoys a singular socioeconomic viewpoint. The entrepreneur and champion of 5G connectivity has had a productive year as both executive director of the Business Incubator Association of New York State and executive director of Shoreham’s Tesla Science Center at Wardenclyffe, all while leading his 2014 advanced-scanning startup SynchroPET to the edge of commercialization and chairing Campolo, Middleton & McCormick’s Economic Development Practice Group. The innovation buffet keeps the forward-thinker on the front lines – but his marquee moment may be 2018’s “Goosebumps 2: Haunted Halloween,” a big-screen sequel featuring characters based on the Alessi family. The father, fundraiser and industrious innovator takes a breath to share his unique perspectives:  

Open house: We’re hiring our architect and engineering firm and filing for permits this year to begin the next stage of construction at the Tesla Science Center – destruction, actually, then reconstruction. First, we’ll file the permits for our Visitor Center, which involves rehabilitating an old house on the site, the easiest to open to the public.

Lab work: We’re doing a full site plan with the county and the DEC and that’s going to take more time. Depending on how long that process takes, we can start taking down the buildings that need to come down and concentrate on shoring up the laboratory. We’re very anxious to raise all the capital we need to complete the project, but we have enough on hand to get started. We need to raise at least another $10 million to complete the lab building.

Big-name backers: We’ve raised a total of $7 million on a $20 million capital campaign. At least half of that has come from the innovation ecosystem, some from the local ecosystem, including Eugene Sayan, the CEO of Softheon, who’s a major benefactor. Elon Musk was another benefactor with a seven-figure gift, and we got a million-dollar commitment from a venture capitalist out of Princeton.

Spread the word: The Tesla center has an exhibit in a 5,000-square-foot loft in the Jack London District in Oakland, where we’ve done a number of VIP events. We’ve held events for Tesla Motors and we’re planning a series of events for Google employees. The purpose is to raise awareness of what we’re doing at Wardenclyffe in different tech hotbeds, where a good part of our support comes from. Another example was the South by Southwest Conference in March; we went down and now a number of those folks are contributors and advisors.

A-list advisors: We have an incredible group of advisors. We have venture capitalist Greg Olsen, the founder of GHO Ventures, and Vin Cerf, the inventor of the Internet and one of the most amazing people ever. And there’s John Cohn, an MIT professor who heads up artificial intelligence at IBM, and Joe Campolo, who’s really helped us raise capital.

Adding muscle: Having advisors like these, and Peter Klein of the Claire Friedlander Family Foundation and Richard Moxley from Blackbird Technologies, adds credibility to the project. When folks of this substance add their name, people know it’s going to happen and they invest. We need to continue to get people in this demographic interested, and having a board with connections to Silicon Valley executives at the highest levels really helps.

Incubating the Incubator Association: We’ve grown a great deal over the last two years. Our membership is now a little over 90 business accelerators and incubators across the state. Our annual meeting in Syracuse has now grown to a two-day conference (June 10 and 11) because of all the additional programming.

Techstars tutorial: We’ll be talking to incubator managers (at the conference) about mentorship and preparing their companies to pitch early-stage investors – what investors are looking for this year, in terms of technologies and trends. And a number of our upstate accelerators have become Techstars chapters, so we’ll be talking to the larger membership about that mentorship methodology.

Welcome to New York: The next program the Incubator Association will be bringing forward is a “soft landings” program. We get contacted often by foreign economic-development offices with startups that want to do business in New York State, and need help navigating. We’re going to create a curriculum for incoming companies that will match them with our accelerators and incubators and get them the opportunities they need to do business in New York.

SynchroPET your watches: We’re ending the beta process for our preclinical small-animal devices and moving those to commercial sales this year. We have our first human data coming from Cornell University and we’re in the process of setting up our (human trial) beta site.

Anticipating approvals: That next beta site is a big milestone for us – our noninvasive arterial PET scanner has created a lot of interest in the industry. We can sell it for research purposes to R&D companies, but in order to sell it to hospitals, we have to go through the FDA 510(K) process, and we’re planning for that now.

Serious series: SynchroPET is also looking to raise our Series A by the end of the summer. We’re looking to raise $2 million to $3 million, which will help us get through our first commercial sales and get us through the FDA process once the arterial PET scanner comes out of beta. 

Opportunity knocks: The whole “Goosebumps” thing has been pretty surreal. My two young boys caught my entrepreneurial bug and went knocking on doors on our street, offering to move garbage cans up and down driveways for $2 a week. They knocked on my neighbor’s door, and he’s a screenwriter and film writer who was working on this script and had about a month to finish it.

Family flick: They inspired the “junk brothers” in the movie. My daughter Sarah and my sons Sonny and Sammy are all characters in the movie, and my wife, whose name is changed to “Kathy Quinn,” played by the mother from “The Goldbergs.” My character was cut from the movie; they couldn’t find an actor dynamic enough to play Marc Alessi.

Giving ‘Goosebumps’: We went down (to Atlanta) to watch the filming last February, and met all of the actors and actresses playing my children and my wife. And it was amazing watching it on the big screen. I wound up buying tons of all of the books and DVDs – it’s the only gift people will be getting from me for the next 10 years.

Interview by Gregory Zeller.

By Patrick McCormick

On May 7, 2019, the Court of Appeals in 159 MP Corp. v Redbridge Bedford, LLC, 2019 WL 1995526, agreed that a tenant’s waiver of the right to bring a declaratory judgment action based upon the specific terms of the commercial lease is enforceable. This waiver effectively precluded the tenant from obtaining a Yellowstone injunction, and could now allow commercial landlords to limit their tenants’ litigation options when landlords allege lease violations by their tenants.

In a split decision, the Court of Appeals ruled in favor of the right to freedom of contract so long as no laws are violated. Notably, the dissent reasoned that the tenant’s ability to litigate in summary proceedings was not sufficient to deny the tenant’s ability to commence a declaratory judgment action. Although the dissent noted that New York’s legislative history consistently sustained the right to declaratory judgment action, in keeping with other common-law decisions and with precedent dating back to England, both sides agreed that freedom of contract would be upheld in the interests of the safety, stability and the betterment of society, not as an individual right. But, the majority and minority disagreed as to whether this particular clause furthered that public policy.

The case concerned two commercial leases which granted Plaintiffs a twenty-year lease to operate a Foodtown supermarket, with an associated storage space, on a property in Brooklyn. Within each lease, Paragraph 67(H) stated: “Tenant waives its right to bring a declaratory judgment action with respect to any provision of this Lease or with respect to any notice sent pursuant to the provisions of this Lease…” In March 2014, Defendant (landlord) served Plaintiffs (tenant) with a default notice and demanded Plaintiffs cure the violations or their leases would be terminated. Tenant subsequently commenced an action seeking a declaratory judgment that they hadn’t defaulted and sought a Yellowstone injunction to toll the cure period and prohibit the landlord from terminating the leases while the matter was before the Court.

In upholding the lease waiver provision, the Court of Appeals affirmed the lower Court’s observation that absent “violation of law or transgression of strong public policy,” both parties were free to execute whatever agreement they deemed acceptable (see 159 MP Corp. v. Redbridge Bedford LLC, 2015 NY Slip Op 32817(U) and Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d 62 (1978)) and held that “there [was] no reason to relieve them of the consequences of their bargain” (see Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685 (1995)). The Court further assessed that the waiver did not prevent Plaintiffs from seeking all legal redress, that they had access to legal counsel, and that the terms of the agreement were very clear and precise and thus should be enforced “according to its terms” (see Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470 (2004)). The Court further held that “in light of strong public policy favoring freedom of contract [(see New England Mut. Life Ins. Co. v. Caruso, 73 N.Y.2d 74 (1989)) and as a right granted in the Constitution (see U.S. Const. art. I, § 10[1])], [the] parties may waive a wide range of rights.”

In this case, public policy was upheld in favor of the landlords’ right to evict due to the specific language agreed to in the lease. This decision has the potential to alter landlord-tenant law in New York State for years to come, as commercial landlords will surely include a waiver of declaratory and Yellowstone relief in their leases going forward. Therefore, commercial tenants and their counsel should carefully review all draft agreements for explicit waivers of their right to seek Yellowstone relief, injunctive relief or declaratory judgments, and think carefully about whether the costs outweigh the benefits before giving up such legal recourse.

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Rassiger leads CMM’s Construction practice group, where he has represented clients on all sides of the table including owners, developers, general contractors, subcontractors, engineers, architects, construction managers, and program managers. Rassiger also manages the firm’s Corporate department, where he has successfully closed dozens of M&A deals. His corporate work also includes numerous financing transactions including sale/leaseback, lines of credit, and debt/equity financing.

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By Patrick McCormick

In an article published in last year’s Suffolk Lawyer, I discussed decisions that upheld the confidentiality of attorney-client communications, one of our oldest common law evidentiary privileges. The two cases in question – Stock v. Schnader Harrison Segal & Lewis LLP, 142 A.D.3d 210 (1st Dep’t 2016), regarding intra-firm communications by attorneys seeking ethical advice, and Rossi v. Blue
Cross and Blue Shield of Greater N.Y., 73 N.Y.2d 588 (1989), which provided protection to corporate communications that are predominantly legal in character – helped expand and develop attorney-client privilege into a robust doctrine. Now in two recent decisions by the First and Third Departments, the Appellate Division provided clarification regarding the limits of attorney-client privilege. 

In January 2019, the First Department, in Metropolitan Bridge & Scaffolds Corp. v. New York City Hous. Auth., 168 A.D.3d 569 (1st Dep’t 2019), held that the New York City Housing Authority (NYCHA) waived attorney-client privilege when it placed the knowledge of its counsel at issue with respect to documents that were the subject of a discovery dispute. Namely as NYCHA alleged the third-party defendants defrauded their Law Department, they were required to establish reasonable reliance on third-party defendants’ “alleged misrepresentation.” The Court further held that NYCHA could not rely on attorney-client privilege to redact or withhold documents while selectively disclosing other privileged communications in support of their own interests. (See Deutsche Bank Trust Co. of Ams. v. Tri-Links Inv. Trust, 43 A.D.3d 56, 64 (1st Dep’t 2007); Orco Bank v. Proteinas Del Pacifico, 179 A.D.2d 390, 390 (1st Dep’t 1992)).

The case concerned NYCHA’s alleged nonpayment to Metropolitan for equipment and services provided at various NYCHA residences. In response, NYCHA filed a third-party complaint alleging that the third-party defendants (Liberty Architectural Products, et. al.) had conspired to deceive NYCHA by submitting fraudulent certifications attesting that Metropolitan’s former owners had never been convicted of a crime (a conviction would have resulted in disqualification). Following a discovery dispute concerning NYCHA’s failure to produce documents regarding the alleged conspiracy and its reliance on the false certifications, NYCHA eventually produced over 700 heavily redacted documents, and withheld another group of over 400 documents as privileged. Another late production of documents followed depositions. Plaintiff and Third-Party Defendants moved to compel NYCHA to comply with prior discovery orders, and the Court granted the motion, taking issue with NYCHA’s claims of attorney-client privilege.

On appeal, the First Department affirmed the motion court’s decision, holding that “the court correctly found that having placed the knowledge of its law department at issue, NYCHA waived attorney-client privilege with respect to the subject documents” and further that “NYCHA may not rely on attorney-client privilege while selectively disclosing other self-serving privileged communications.” 168 A.D.3d at 571-572.

In a similar context, in February 2019, the Third Department echoed the First Department’s clarification regarding which material does not fall under attorney-client privilege. In Galasso v. Cobleskill Stone Prods., Inc., 169 A.D.3d 1344 (3rd Dep’t 2019), Plaintiff, a shareholder of Cobleskill Stone Products, Inc. (Defendant), alleged that pursuant to Business Corporation Law §§ 706(d) and 716(c), the Defendant squandered corporate assets and “engaged in self-dealing,” acting in self-interest rather than in the interests of the corporate shareholders. In the course of discovery, Defendant requested a valuation of stock report, which was prepared for Plaintiff by an independent business valuation and advisory firm. Plaintiff refused to provide the report on the grounds that the report was not material and necessary, and that it was furthermore privileged information, at which time the Defendant moved to compel discovery. The Supreme Court granted Defendant’s motion to compel discovery, after which the Plaintiff appealed.

On appeal, the Third Department unanimously upheld the lower court’s decision, holding that the Supreme Court was vested with the discretion to determine whether discovery was “material and necessary in the prosecution or defense of an action” (CPLR § 3101(a)). Key to the Court’s analysis in determining the validity of the valuation report falling under attorney-client privilege was Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 NY3d 616, 623 (2016), which held that the party asserting attorney-client privilege was required to establish that the communication in question was between an attorney and client “for the purpose of facilitating the rendition of legal advice or services” and was “predominantly of a legal character.” As the valuation report was not initially created for litigation purposes, contained no legal information and was originally for estate tax purposes, the Court judged it not to be “of a legal character.”

Most importantly, the Court specified that because the valuation report expressed “serious and substantial concerns” to Plaintiff based on its appraisal of Plaintiff’s stocks in Defendant, the valuation report played a role in the commencement of legal action in this matter. Thus, the court declared it “probative,” stating that it provided proof or evidence for why Plaintiff brought allegations of gross malfeasance against Defendant in the first place. Applying that logic, the Appellate Division agreed with the lower court’s determination that the valuation report offered a standard allowing the court to evaluate Plaintiff’s damages.

These recent decisions show that attorney-client privilege can be inapplicable in instances where the communications in question are the basis for bringing a legal action before the court. Due to their very nature as intrinsic to the legal action in question, the Court and all parties involved in the action must be allowed access to information which may be classified as “privileged” in other instances. Although the privilege offers vast protection, litigants and their counsel are warned that they should not automatically assume attorney-client privilege provides exemptions from disclosure for material and necessary information upon which a legal claim is asserted.