On the other hand, I understand why the Court, and the New York Legislature set up the rules in this fashion: simply put, if they allowed unlicensed contractors to still get paid for work that requires a license, then that would effectively abrogate the need for the license altogether.

And that’s precisely what happened in Enko Construction Corp. v. Aronshtein. In this Nassau County case, the plaintiff construction company sought payment of monies owed for the home improvement work it did, but wasn’t paid for, in either breach of contract or quasi-contract (i.e., the reasonable value of the services they rendered on equitable grounds, which is also referred to as “unjust enrichment” or “quantum meruit“). There was one “small” problem with its claim, though:  the plaintiff wasn’t licensed to do home improvement.

Thus, in dismissing the complaint, the Court held as follows:

“It is well settled that a home improvement contractor who is unlicensed at the time of the performance of the work for which he or she seeks compensation forfeits the right to recover damages based on either breach of contract or quantum meruit. B & F Bldg. Corp. V. Liebig, 76 N.Y.2d 689 (1990); Flax v. Hommel, 40 A.D.3d 809 (2nd Dept. 2007).”

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But there are other cases, like Springer v. Linden Seventh Day Adventist Church, where the failure to get a written contract spells death to the claim. And, as painful as it may be to the plaintiff, the Brooklyn judge deciding this case was absolutely right.

First, the plaintiff, who was producing a documentary on behalf of the church, never actually received the church board’s approval for the project. In fact, he never dealt directly with anyone that had authority to bind the church to any agreement. Second, they never agreed on any price for the services that he was going to render.

As noted by the Court, “plaintiff acknowledged that no material terms of the contract (including payment) were ever stated, defined, or agreed upon, and that the Church Board never agreed to pay him … There was no agreement as to the details of what type of film would be made, the starting or ending date of such production, and no price terms were discussed between plaintiff and defendants. Thus, plaintiff cannot sustain his claim for breach of contract (see Matter of Express Indus. & Term. Corp., 93 NY2d at 589).”

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The plaintiff must prove that the defendant both intentionally AND without justification induced a third party to break their contract with the plaintiff.

Why is that so hard?

The answer, I believe, lies in the latter prong – without justification – because that is where many defendants have successfully defeated tortious interference claims. And the way they’ve done it is by simply showing that their actions were done for their legitimate economic interests. Make no mistake: that is a very broad category.

In fact, New York’s highest court has held that this exemption applied not only where the defendant was a direct competitor of the plaintiff’s but even if they weren’t directly competing, and summarized the rule as follows:

“The existence of competition may often be relevant, since it provides an obvious motive for defendant’s interference other than a desire to injure the plaintiff; competition, by definition, interferes with someone else’s economic relations. Where the parties are not competitors, there may be a stronger case that the defendant’s interference with the plaintiff’s relationships was motivated by spite. But as long as the defendant is motivated by legitimate economic self-interest, it should not matter if the parties are or are not competitors in the same marketplace.” (Carvel Corp. v Noonan, 3 NY3d at 191.)

Obviously, this is not an easy hurdle to clear.

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The guy is intent on suing the big, bad company for breach of contract in a New York court; he is adamant that he doesn’t want to go to arbitration as called for in their agreement because he is convinced he won’t get a fair shake at arbitration (not to mention that it will prove rather expensive for him).

There’s one problem, however: as noted in an earlier article of mine,  it’s very difficult to invalidate a mandatory arbitration clause in New York. Even though he wanted to cast his claim as a business tort, as distinct from a straight breach of contract claim, I pointed out to him that if his attempt to circumvent the arbitration clause could be undone that easily, then mandatory arbitration clauses would be rendered virtually meaningless.

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Now, let’s not be naive; the reason the story is being reported upon is because of the named defendant – Victoria’s Secret – and because anything that invokes their name – particularly if it even has the scent of a scandal – will sell.

But, the article does have some educational value, however. Although the article doesn’t spell it out, it actually sets forth some of the essential elements of a tortious interference with contract claim under New York law, pointing out that the plaintiff seeks to recover by dint of Victoria Secret’s acts of inducing the Chinese shoe makers to end their contract with Valley Lane, and how this act cost the plaintiffs in excess of $20 million in damages.

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But, as noted by the Court, therein lies the problem: the allegations are unsubstantiated.

In Lecce Penn Co. SPA v. Adrenaline Marketing & Promotions, Inc., the plaintiff sued in breach of contract and fraud to recover over $300,000 that they were purportedly owed. Fair enough.

But the plaintiff took it a step further: they tried to sue one of the shareholders of the defendant corporation personally.  Unfortunately for the plaintiff, they had no competent proof that this individual did anything that should have resulted in his being held personally liable for the corporate debt; in fact, the plaintiff did not even allege that he did anything that should have entitled them to pierce the corporate veil.

The thing that troubles me about this case is simply this: while I can understand that there are instances where the proof you expected to become available to support your claim doesn’t materialize, I don’t understand how the complaint itself can even fail to have any of the requisite allegations to support a claim seeking to pierce the corporate veil. That’s just poor draftsmanship.

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The reason is fairly simple: the courts – beginning with the United States Supreme Court – have clearly sided in favor of upholding arbitration provisions rather than invalidating them.

First, and at the outset, one New York Federal Judge held that claims of adhesion are generally considered objections to a contract and not to an arbitration provision. See Wright v. SFX Entm’t Inc., 00 Civ. 5354, 2001 WL 103433, at *3 (S.D.N.Y. Feb. 7, 2001). Applying this rule, the court held that the question of whether the arbitration clause was enforceable had to be determined by the arbitrator rather than the courts.

Moreover, and in any event, the courts generally disfavor invalidating contracts on grounds of adhesion or unconscionability, stating: “A court will find adhesion only when the party seeking to rescind the contract establishes that the other party used ‘high pressure tactics,’ or ‘deceptive language,’ or that the contract is unconscionable.

“Typical contracts of adhesion are standard-form contracts offered by large, economically powerful corporations to unrepresented, uneducated, and needy individuals on a take-it-or-leave-it basis, with no opportunity to change the contract’s terms.”

To that end, and in the employment context, the United States Supreme Court stated as follows: “The unequal bargaining power between employers and employees is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context. Cf., e.g., Rodriguez de Quijas, supra, at 484, 109 S.Ct., at 1921-1922. … Such a claim is best left for resolution in specific cases.”  Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647 (1991).

In light of the Supreme Court’s relatively clear language on the subject, a trial court’s unwillingness to challenge it in a specific case is quite understandable.

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Recently, in Rampersant v. Nationwide Mutual Fire Ins. Co., a Brooklyn  judge dismissed the lawsuit brought by a Kings County man against his auto insurer, which sought money to replace his stolen SUV. And, from all appearances, it was in fact stolen.

But the insured was penny-wise and pound foolish. In an effort to save a few dollars off of his insurance premium, he indicated that he resided in North Carolina rather than New York, where he actually lived. When the insurance company investigated his claim that his SUV was stolen from New York and found that he in fact lived, and kept his vehicle, in New York, they found that he made a material misrepresentation (i.e., “lied”) in his application for insurance, which led them to underwrite his policy at a lower premium than had he indicated his true residence in New York.  Therefore, in concluding that his policy was issued on fraudulent grounds, (in legalese, “misrepresentation“), the company voided his insurance contract retroactively and denied the claim.

Leaving aside the moral component to lying on an insurance application, this insured did something that was patently foolish: the entire purpose of having insurance is to cover you in the event of a loss; but by lying on the application in order to save a few dollars in the short run, he guaranteed that the policy would never cover him. In other words, he just threw money out the window.

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In response to the complaint, the defendant moved to dismiss the complaint on the grounds that since there was no written agreement between the parties, the breach of contract claim was barred by New York’s Statute of Frauds, in accordance with Uniform Commercial Code 2-201.

Ultimately, the Court sided with the plaintiff and denied the motion, citing three (3) important exceptions to the Statute of Frauds:

(1) Since the plaintiff sent invoices together with the goods which “afford a basis for believing that they reflect a real transaction between the parties,” this case falls under the “merchant’s exception” to the Statute of Frauds (UCC 2-201(2)), which states as follows:

“Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection 1) against such party unless written notice of objection to its contents is given within ten days after it is received”;

(2) Inasmuch as the defendant both received and accepted the goods, plaintiff’s claim falls within another exception to the Statute of Frauds, as codified by UCC §2-201(3)(c);  and,

(3) Contrary to the defendant’s contention that the case should be dismissed in accordance with NY Gen. Obl. Law 5-701 because the oral agreement was open-ended, and therefore incapable of being performed within one year, the Court held that this provision bars “only those contracts which, by their terms have absolutely no possibility in fact and law of full performance within one year.” Applying that rule to this case, the Court stated as follows:

“Here, the statute of frauds is not a bar to enforcement of the alleged oral agreement because its performance within one year was possible. The terms of the alleged oral agreement anticipated prospective purchases but did not bind either party to any particular transaction, and performance depended solely upon the will and desires of the two parties (Nat Nal Serv. Sta. v. Wolf, 304 N.Y. 332, 340, 107 N.E.2d 473). Diamond Dairy might or might not have placed orders with Hood and Hood might or might not have accepted them. Accordingly, neither party was bound by the terms of the alleged oral agreement “to do anything at any time, and consequently there is nothing in its terms to bring it within the statute of frauds.”

The moral of this particular case is fairly straightforward: even if you don’t have a formal written agreement, you may still be entitled to recover your losses under New York law.

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Unfortunately, for purposes of evaluating the enforceability of a non-compete, or non-competition agreement, the difference between voluntarily resigning and being fired is quite important under New York law. This is known in legalese as the “employee choice doctrine.” (For additional information on this topic, please see “When NY Courts Will Uphold Non-Compete Clauses – No Matter How Unreasonable“).

As a tacit exception to New York’s rule that disfavors non-compete agreements, the employee choice doctrine is based on the notion that “if the employee is given the choice of preserving contract rights by refraining from competition or risking forfeiture of such rights by exercising a right to compete, there is no unreasonable restraint upon an employee’s right to earn a living.” Post v Merrill Lynch, Pierce, Fenner & Smith, Inc., 48 NY2d 84, 421 NYS2d 847, 397 NE2d 358.

But there is a way to defeat this exception.

In case you didn’t already know it (and I suspect that’s most people), you don’t have to actually be fired in order to be considered fired from a job under New York law, and thereby effectively invalidate the non-compete agreement. But as you might suspect, the test to satisfy this doctrine, which in legalese is called “constructive termination” or “constructive discharge,” is difficult to prove.

The test for constructive discharge was established by the Federal courts, and occurs “when the employer, rather than acting directly, deliberately makes an employee’s working conditions so intolerable that the employee is forced into an involuntary resignation” ( Pena v. Brattleboro Retreat, 702 F.2d 322, 325 [2d Cir.1983]. A claimant can prove that she was constructively discharged by establishing that the working conditions “[were] so difficult or unpleasant that a reasonable person in the employee’s shoes would have felt compelled to resign” ( Pena, 702 F.2d at 325 ).

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