Pastore & Dailey successfully defended against multiple rounds of dispositive motions seeking the dismissal of a complaint filed in California state court against certain former officers and directors of a publicly traded company, as well as prevailed in motion practice seeking the dismissal of certain of defendants’ counter-claims. The defendants in this action were represented by a prominent national firm, and were alleged to have, among other things, breached their duties owed to the company, and committed corporate waste, during their time as directors and/or officers. Subsequent to prevailing at the dispositive motion stage of the litigation, a favorable settlement was obtained on behalf of the client corporation.
Tag: Commercial Litigation
Dispositive Motions Win
Pastore & Dailey recently prevailed on behalf of Plaintiff after oral arguments against Defendant’s dispositive motions seeking the dismissal of a complaint filed in California state court against certain former directors and officers of a publicly-traded company. The defendants in this action were represented by a prominent nation firm, and are alleged to have, among other things, breached their duties owed to the company, and committed corporate waste, during their time as directors and/or officers.
TRO Victory in NYS Supreme Court
Pastore & Dailey recently obtained a rare temporary restraining order in NYS Supreme Court (New York County) for a financial services employer (including a FINRA member firm) against 4 ex-employees and their new employer to enforce the restrictive covenants (including non-solicitation of employees and customers clauses).
Former Dissident Shareholder Becomes Qualstar’s Interim CEO
Former Dissident Shareholder Becomes Qualstar’s Interim CEO
Steven Bronson, the investor who took control of Qualstar Corp. after a proxy fight, has been named its interim chief executive and president, the company announced Monday.
Bronson, a member of Qualstar’s board, was appointed to replace Larry Firestone, who became chief executive of the Simi Valley data tape storage and power supply manufacturer in June 2012.
Bronson immediately closed a Qualstar office that Firestone opened in Denver and is terminating the executives working there. The move will result in a savings of about $1 million, according to the company.
In June, Bronson and four other candidates were elected to the Qualstar board after longstanding complaints that the money-losing company was underperforming. Bronson and BKF Capital Group Inc., his Boca Raton, Fla.-based investment firm, are the second largest investors in the company, with an 18 percent stake.
For there to be a successful turnaround of the company, Bronson said expenses need to be controlled and reduced.
“The board (of directors) will continue to take the appropriate actions to right-size Qualstar, support its current and future business, build a solid foundation and preserve its liquidity base,” Bronson said, in a prepared statement.
Bronson also is chief executive of Interlink Electronics Inc., a Camarillo manufacturer of touch pads and mouses for computers and other electronic equipment used in industrial and consumer applications.
Shares closed up 1 cent, or a fraction of percent, to $1.41 on the Nasdaq.
By Business Journal Staff Monday, July 15, 2013
NYS Court Limits Definition of Single Occurrence by Enforcing Non-Cumulation Clause
In an important recent decision in the toxic tort field, a New York appellate court decided in Nesmith et al. v. Allstate Ins. Co., 103 AD3d 190 (4th Dep’t 2013) that pursuant to a non-cumulation clause, Allstate Insurance Company was responsible for only one policy limit in connection with lead paint exposure claims asserted on behalf of multiple children who resided in the same apartment during separate tenancies nearly a year apart and during different policy periods.
Allstate insured the apartment building owner, Tony Clyde Wilson, from 1991 through 1994 under three consecutive one year insurance policies, each with a $500,000 per occurrence coverage limit. During the second policy in 1993, two children were exposed to lead based paint in one of the apartments within Mr. Wilson’s building. The family vacated the premises and subsequently commenced a lawsuit on behalf of the children against Mr. Wilson. After the first family vacated the apartment, the Nesmith family commenced its tenancy within the same apartment within the building. The Nesmith children were also exposed to lead based paint within the same apartment during the third policy period in 1994. The Nesmith family commenced its own lawsuit on behalf of its children against Mr. Wilson. While the Nesmith family’s lawsuit was pending, Allstate effectuated a settlement in the amount of $350,000 in connection with the first family’s lawsuit. Subsequent to the settlement, Allstate asserted that the “non-cumulation” and “unifying” clauses in its policy confined its liability for all lead exposures in the subject apartment to a single policy limit of $500,000. Accordingly, Allstate took the position that there was only $150,000 of available coverage as the $500,000 per occurrence limit had been diminished by the $350,000 settlement with the first family. Allstate and the Nesmith family reached an agreement that the Nesmith family would receive the $150,000 balance if Allstate’s non-cumulation clause was upheld, but the Nesmith family would receive $500,000 if it was determined that the Nesmith claims arose from a separate occurrence.
In reaching its decision, the appellate court initially considered the well-settled contract principle that “unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court”. Nesmith at 193 citing to White v. Continental Cas. Co., 9 NY3d, 264, 267. Accordingly, the court considered the following provision from the Allstate policy at issue:
Regardless of the number of insured persons, claims, claimants, or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declaration page. All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the general conditions is considered the result of one accidental loss.
The court noted that the New York Court of Appeals had previously interpreted a nearly identical Allstate policy provision in Hiraldo v. Allstate Ins. Co. (5 NY3d 508, 512). In Hiraldo, a child was exposed to lead paint over a three year period in an apartment that was insured by three consecutive one year renewable insurance policies. The Court of Appeals in Hiraldo concludedthat the non-cumulation clause prevented the plaintiff from recovering under each of the three consecutive insurance policies.
The appellate court in Nesmith court adopted the reasoning in Hiraldo, but the Nesmith court also took the analysis one step further to consider whether the exposure to lead based paint by children residing within the same apartment during different tenancies can be considered a single occurrence. In other words, the Nesmith court was evaluating whether each child’s alleged injuries were “resulting from one accidental loss or from continuous or repeated exposure to the same general conditions” as described in Allstate’s non-cumulation clause. Ultimately, the court concluded that the children were exposed to the same lead paint even though they resided in the subject apartment at different times nearly a year apart. In reaching its conclusion, the court relied upon another toxic tort decision in Mt. McKinley Ins. Co. v. Coming, Inc., 96 AD3d, 451, 452 (1st Dep’t 2012). In Mt. McKinley, the court determined that “any group of claims arising from exposure to an asbestos … condition at a common location, at approximately the same time may be found to have arisen from the same occurrence”. In Nesmith, the court applied similar reasoning when stating that “In as much as the claims arise from exposure to the same condition and the claims are spatially identical and temporally close enough that there are no intervening changes in the injury-causing conditions, they must be viewed as a single occurrence within the meaning of the policy. The Nesmith decision appears to be another in a line of decisions that limit the number of occurrences in the toxic tort arena. See, Ramirez v. Allstate Ins. Co., 26 AD3d 266 (1st Dep’t 2006) (lead paint matter involving multiple infant-plaintiffs residing within the same apartment who may have ingested lead paint determined to be single occurrence); Appalachian Ins. Co. v. General Elec. Co., 863 N.E.2d 994 (court denied aggregation of multiple asbestos related claims in order to insurance policy per-occurrence coverage limits because incident giving rise to liability was each claimant’s repeated or continuous exposure).
Accordingly, Nesmith continues the trend in New York of enforcing insurance policy non-cumulation clauses in order to limit the definition of occurrence in toxic tort personal injury lawsuits. It appears that the courts are inclined to unify claims that are spatially identical and temporally proximate into a single occurrence regardless of the number of different plaintiffs.
Supreme Court: No Protection for Pre-Miranda silence without Fifth Amendment Invocation
The Supreme Court has ruled in a 5-4 decision that unless a criminal suspect expressly invokes the Fifth Amendment right to remain silent during pre-Miranda questioning, the suspect’s silence may be admissible evidence at trial. The majority of the court agreed that the privilege is not “self-executing,” and that those defendants who desire its protections “must claim it.”
Before Genoveno Salinas’ trial and conviction for a double murder committed in Houston, Texas in 1992, police had visited the house of Salinas’, the prime suspect in the case, and seized a shotgun that was believed to be the weapon used in the crime. Police subsequently questioned Salinas’ in the police station, but neither arrested him nor read him his Miranda rights before the interrogation began. Both Salinas and the prosecution agreed that the questioning was voluntary, and that Salinas was free to leave at any time.
However, Salinas was eventually asked a question for which he chose not to respond. The officer asked whether a ballistics report from the shotgun shells found at homicide would match the results for the shotgun taken from Salinas’ house – and to this question he fell silent, without expressly invoking his Fifth Amendment Right. The prosecution later used this silence as a means to establish an inference of guilt, while the defendant argued that using his silence as evidence against him was a violation of his constitutional rights.
While the Court’s five conservative-leaning Justices joined in the decision to allow the silence to be used as evidence, Justice Thomas’ concurring opinion went one step further. He argued that even if Salinas’ had expressly invoked his Fifth Amendment right to remain silent, his non-responsiveness to the officer’s question would still have been admissible nonetheless. This rationale was based on an originalist interpretation of the Constitution, under the theory that admission of this evidence would still not have compelled the defendant to act as a witness against himself. This narrow interpretation of the protections afforded by the Fifth Amendment was also supported by Justice Scalia.
The dissenting opinion, written by Justice Breyer, rejects both approaches taken by the majority, arguing instead that the privilege does not need to be directly related to “testimony,” but rather applies in any situation where a defendant is attempting to avoid divulging incriminating information about oneself. However, the majority of the Court agreed with the Texas Supreme Court, and upheld the lower court’s decision to admit the silence as evidence of Salinas’ guilt.
Although the scope of this decision is limited to the field of criminal law, the effect that it will have on cases of defendants pleading the Fifth Amendment in non-criminal proceedings has yet to be seen. If the same principles of law are someday applied to other forums of legal disputes, such as administrative proceedings, lawyers and their clients may soon find themselves re-evaluating the process by which they can claim the Fifth Amendment and still be afforded the protections that they have come to expect from it.
Pastore & Dailey Wins Motion to Dismiss for National Financial Services Client
Recently a Memorandum of Decision was issued granting a Motion to Dismiss in an action involving one of Pastore & Dailey’s financial services clients. Below is a summary of the well written decision by Judge Spatt.
The plaintiff alleged claims under the Fair Debt Collection Practices Act (“FDCPA”) and the New York General Business Law § 349, as well as common law causes of action. On behalf of the defendant, a major national credit provider, we filed a Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted, which was granted by the court.
The District Court first addressed whether the defendant qualified as a debt collector under the FDCPA, and found that it did not. The FDCPA prohibits deceptive and misleading practice by “debt collectors” and defines debt collectors as those engaged in “any business the principal purpose of which is the collection of any debts.” Creditors, however, are defined as “any person who offers or extends credit creating a debt or to whim a debt is owed.” The defendant is a creditor under the statute and the FDCPA limits its application to debt collectors.
The distinction between debt collectors and creditors under the FDCPA has one exception however; it is referred to as the “false name” exception. The false name exception is when a creditor attempts to collect its own debt by using “any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” 15 U.S.C. § 1692a(6). This would mean a creditor could be liable under the FDCPA if they were to use a pseudonym or alias in attempting to collect their debts.
The plaintiff attempted to assert that the defendant’s conduct fell under the false name exception because under the facts proffered by the plaintiff, the defendant allegedly held themselves out to be someone else in communicating with a third party. The court rejected this theory of liability.
The false name standard has been found to be whether “the least sophisticated consumer would have the false impression that a third party was attempted collect the debt.” Maguire v. Citicorp Retail Services, 147 F.3d 232, 236 (2d Cir. 1998). It was apparent that the defendant never utilized a false name in communicating with the consumer plaintiff, and under the Maguire standard, a court must look to the communications with the debtor to determine whether the false name exception applies. Defendant’s communications with the debtor were not misleading or under a false name.
Thus, the Court concluded that Defendant was not a debt collector under the FDCPA, despite the false name exception, and accordingly granted our Motion to Dismiss the FDCPA causes of action.
After granting our Motion on the above grounds, The District Court also considered the additional reasons asserted for why the Plaintiff’s claims failed. Even if our client was considered a debt collector, Plaintiff’s claims under Section 1692e of the FDCPA failed because the communications from Defendant’s offices were nothing more than attempts to learn the correct contact information for Plaintiff’s attorney, rather than any false representations or deceptive attempts to collect a debt. The District Court found our position meritorious as to Plaintiff’s claims under Sections 1692e(9) and(10), stating that even if the defendant were a debt collector, those claims would be dismissed for failure to state a claim. The Court found that “once again the Plaintiff has failed to provide any authority for the theory that a debt collector can be liable for communications made to a party that is not the debtor, even though tangentially related to the collection of the debt.” (Memorandum of Decision, p. 13).
The District Court declined to address any of the state or common law causes of action.
Connecticut Complex Litigation
On October 16, 2012, the Connecticut Superior Court denied motions to dismiss filed by separate defendants in response to an amended complaint filed by our client, a 1031 Exchange Company. Each defendant (one a large banking institution and the other, a top nationwide law firm) filed motions seeking to have the suit dismissed on, among others, the grounds of forum non conveniens and improper venue. The amended complaint alleged that both the bank and the law firm violated multiple laws by withholding evidence in a prior civil suit filed against our client, who assists with Section 1031 like kind exchanges. As a result of the alleged withholding of key evidence, our client was held liable in Massachusetts state court for a substantial amount of money for improperly trading funds that were to be conservatively invested for its Section 1031 clients. Instead of assisting our client with the conservative investment strategy, the bank in question allegedly encouraged our client to engage in risky trading of the funds. Not only did the bank allegedly encourage the risky trading when it knew it should not have, but, their attorneys, with the bank’s aid, allegedly withheld the evidence needed to exculpate our client. Because the evidence was allegedly withheld and some of it was allegedly destroyed, our client was held liable in Massachusetts state court for the risky trading and a judgment entered against it. The alleged actions of our client led to criminal trials in Massachusetts and ultimately, two convictions, which have subsequently been overturned. Had the bank not allegedly encouraged our client to make such risky trades when the bank was allegedly aware that the invested funds were to be conservatively traded and had the bank and its law firm not allegedly concealed and destroyed evidence, our client would not have been found liable to the 1031 investors for certain damages and no criminal trials would have ensued. Thus, the amended complaint asserted twenty causes of action against the bank and the law firm, which causes of action include indemnification, contribution, unjust enrichment, intentional spoliation of evidence, breach of fiduciary duty and many others.
The case is pending on the Connecticut Superior Court’s Complex Litigation Docket. In his opinion, Judge William Bright, when considering all of the elements needed for a forum non conveniens dismissal, noted that Connecticut would indeed be a proper forum for this action despite the years of litigation that took place in Massachusetts between the parties. Finally, Judge Bright found defendants’ contention that venue is inappropriate unpersuasive. Thus, after a decade of litigation in Massachusetts against the 1031 exchange, the bank and the law firm, our client now has the opportunity to litigate in Connecticut, its home state, and can take discovery of various parties that it has not been able to for the years in question.
Success Systems Inc. v. Tammerica Lynn et al.
In a recent decision, handed down on October 10, 2012, the U.S. District Court of Connecticut denied a motion to vacate a judgment, which judgment was initially entered in our client’s favor in April 2010. The lawsuit was originally filed by our client in the U.S. District Court of Connecticut in 2006. After the defendant failed to appear and after a hearing in damages, the Court finally entered the judgment in 2010. We then successfully registered the judgment in the District of Massachusetts (in an effort to collect on the judgment via seizure or property and assets). Subsequently, the defendant sprang to life and filed motions to vacate the judgments in both the District Court of Connecticut and the District Court of Massachusetts. Because the District of Connecticut was the original court, Massachusetts deferred taking action until the District Court of Connecticut rendered its decision. The District Court of Connecticut ordered discovery and ultimately, a hearing on the merits. After discovery closed and on the eve of the hearing, we filed a motion to compel the production of certain documents and information due to the defendant’s evasiveness throughout the discovery process. The Court ultimately granted the motion to compel in full and awarded all attorneys’ fees in preparing and filing the motion. After the hearing, Judge Donna Martinez denied defendant’s motion to vacate, giving our client yet another victory in the years long legal battle to recover monies rightfully owed to it.