Recent EDNY and Second Circuit Decisions of Interest

Theodore Roosevelt Courthouse, Brooklyn, NY

In recent weeks, the EDNY and the Second Circuit (in appeals from EDNY cases) have issued some interesting civil litigation decisions.

In the first, on June 25, 2014, the Second Circuit issued a decision in Giuffre Hyundai v. Hyundai Motor America, Docket No. 13–1886, holding that contractual obligations to provide notice and an opportunity to cure a breach of contract can be excused.

In that case, the the defendant “terminated its contract with” the plaintiff car dealer “after a New York State court concluded that the dealer had engaged in fraudulent, illegal, and deceptive business practices—a clear breach of the contract terms.” The plaintiff filed suit, alleging that the termination violated “section 463 of the New York Vehicle and Traffic Law, which provides protections to motor vehicle franchisees in their dealings with automobile manufacturers” because it was not provided notice and an opportunity to cure. The EDNY granted the defendant summary judgment, which the Second Circuit affirmed. One of the issues discussed in the Second Circuit opinion was whether New York contract law excused a party from an obligation to provide notice of a breach and an opportunity to cure it when the breach could not be cured. Holding that it did, the Second Circuit affirmed the EDNY’s decision, explaining:

New York common law will not require strict compliance with a contractual notice-and-cure provision if providing an opportunity to cure would be useless, or if the breach undermines the entire contractual relationship such that it cannot be cured. In particular, New York law permits a party to terminate a contract immediately, without affording the breaching party notice and opportunity to cure when the breaching party’s misfeasance is incurable and when the cure is unfeasible. When contracting parties agree to a notice-and-cure provision, it is reasonable to assume that they do so with the assumption that the breaches which would be used to terminate the contract would be curable breaches. It is no less reasonable to presume that the legislature operated under the same expectation in drafting section 463.

(Internal quotations and citations omitted) (emphasis added).

In another case, on June 27, 2014, the Second Circuit issued a decision in Leskinen v. Halsey, 13-1157-CV, limiting the application of the probate exception to federal jurisdiction.

In Leskinen, the EDNY dismissed a plaintiff’s RICO and related state-law claims against “various relatives and other participants in the sale of real property once owned by her late grandmother,” holding “that the probate exception to federal jurisdiction precluded its adjudication of [the plaintiff's] claims because they directly target the administration of her grandmother’s estate, including the allegedly improper disposition of real property.” While the Second Circuit ultimately found alternate grounds to uphold the EDNY’s dismissal, it held that the probate exception did not apply, explaining:

This court . . . has narrowly construed the probate exception to apply only if a plaintiff seeks either to (1) administer an estate, probate a will, or do any other purely probate matter, or (2) to reach a res in the custody of a state court. Nothing in the record demonstrates that [the plaintiff] seeks to reach a res in the custody of a state court. Insofar as she sues for racketeering, common law fraud, willful negligence, and negligent misrepresentation, the relief sought may be at odds with concluded state probate proceedings, but the claims do not themselves ask the district court to administer an estate, probate a will, or perform another purely probate matter. In such circumstances, we cannot conclude that federal jurisdiction is lacking.

(Internal quotations and citations omitted) (emphasis added).

Fially, on June 16, 2014, Magistrate Judge Kathleen Tomlinson ruled in Verizon v. The Village of Westhampton Beach, et al., No. 11 Civ. 252 (AKT), that an Eruv could be established in Westhampton Beach. An eruv is an “unbroken delineation of an area” that allows Jews “with certain religious beliefs to carry or push objects from place to place within the area during the Sabbath and Yom Kippur.” Slip op. 1. The court ruled that there is no bar to Verizon and the Long Island Lighting Company (“LIPA”) allowing the placement of wooden or plastic strips, known as “lechis,” on their telephone and utility poles for the purpose of demarcating the eruv. In the action, Verizon and LIPA sought a declaratory judgment that they would not incur any liability to the towns of Westhampton Beach, Quogue, and Southampton by entering into agreements with the East End Eruv Association (“EEEA”) permitting the Association to install the lechis. In a related case, the EEEA asserted that its members’ constitutional rights were violated by the towns when they allegedly prevented establishment of an eruv. The utilities’ declaratory judgment action is less glamorous, turning on the construction of the utilities’ franchise agreements, the state Transportation Corporations and LIPA statutes, and the scope of the towns’ police powers. (The action was stayed as to Southampton so the June 16 ruling pertains only to Westhampton Beach and Quogue.)

Although it was undisputed that the utilities own the poles on which the lechis were sought to be placed, the towns argued that the utilities lacked authority to license use of their poles for other than utility purposes. However, this argument fell flat given that the utilities had previously allowed the temporary mounting of posters and banners announcing local events, such as the Westhampton Beach St. Patrick’s Day Parade. The court construed the utilities’ franchise agreements with the towns and found they contained no prohibition on the utilities licensing use of their poles for non-utility purposes. See Slip op. 24. The court also found that the Transportation Corporations Act, which the court determined was applicable to Verizon, but not LIPA (which was created by statute as a “subdivision of the state,” and was therefore not a corporation subject to the Transportation statute, Slip op. 28), did not bar Verizon from entering into such license agreements. See Slip op. 31-32. As to LIPA, the court determined that Section 1020-g(c) of the LIPA Act gives LIPA “the discretion to lease or use its poles as it sees fit.” Slip op. 39.

That left the question whether the towns’ police powers permit them to prevent the utilities from licensing the use of their poles for placement of lechis. The court held that although the municipalities could regulate the mounting of lechis under their police powers, Westhampton Beach had no ordinance doing so, and as a result there was no municipal regulatory bar to the utilities permitting placement of lechis on their poles. As to Quogue, the town had denied EEEA’s application to place lechis on certain utility poles under an ordinance allowing Quogue to regulate encroachments onto public roads, but the utilities disputed the applicability of that regulation to lechis. See Slip op. 57. The court allowed further briefing on the issue of whether it could interpret the ordinance in light of Quogue’s denial of the application.

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