I find it sad when people learn a lesson the hard way.

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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I was recently contacted by a man who was dealt with unfairly by a much larger company he was trying to do business with. The bigger company, on a whim, decided that they didn’t want to do business with him anymore, so they came up with every reason they could muster – some legitimate, some not – to deem this poor guy in breach of contract.

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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Today’s New York Daily News is reporting that Victoria’s Secret has been sued for inducing the Chinese supplier for a New York and New Jersey-based shoe company to break its 25 year relationship with the shoe company in favor of an exclusive deal with Victoria’s Secret.

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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If the unsubstantiated claims of this plaintiff are actually true, then I feel bad for the plaintiff.

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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Although I’m certainly no fan of the insurance industry, I can’t blame them for fighting this claim. And I don’t blame the Court for siding with them either.

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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Recently, I attended a non-party deposition in a commercial litigation matter arising out of a dispute over who is the rightful owner of a particular property in New York. As is often the case, the attorney conducting the deposition was less than thrilled at the answers given by the witness. So, first he tried to refresh the witness’s recollection. Then he tried to trick the witness by suggesting answers to the questions that he knew were false. And then he proceeded to remind the witness – at least 3 times – about the penalties for perjury, and suggested that incarceration was a foreseeable possibility.

While I didn’t care for his tactics – particularly the latter two – what came next was inexcusable.

He flat-out charged the witness with disgracing his religion by failing to give “better” answers to the questions.

This attorney has made it to my (extremely short) list of people that I don’t communicate with unless it is in writing. And it is attorneys who practice in this fashion that has led to the “sterling” reputation that has made us the butt of so many lawyer jokes.

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As you may be aware, it has become increasingly common for employers to condition their employees’ receipt of post-employment benefits upon the employees’ agreement to abide by a strict non-compete clause.  So here’s the question (which, unfortunately, occurs altogether too frequently): what if the non-compete is unreasonably and unduly restrictive (i.e., prevents you from using your acquired knowledge and expertise to earn a living), and your job has become intolerable to the point you want to quit?

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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It seems to me that many people are under the impression that your hands are completely tied, and you have no immediate recourse to the New York State courts if your former employer breaches your severance agreement. While in many cases, e.g., where the severance plan is governed by ERISA (in which case a common law breach of contract is automatically barred (“pre-empted”), these cases may prove quite difficult, there are some cases – and they are not insignificant – where a discharged employee can still recover damages for unpaid severance benefits.

So what does a plaintiff have to prove in order to win one of those cases?

Although the list is short, as a practical matter marshaling this proof is not simple:

The plaintiff must prove “that the employer made a regular practice of making severance payments and that the plaintiff detrimentally relied on the severance policy, Skarren v Household Finance Corp., 296 AD2d 488, 745 NYS2d 556; Hirschfeld v Institutional Investor, Inc., 260 AD2d 171, 688 NYS2d 31; see Gallagher v Ashland Oil, Inc., 183 AD2d 1033, 583 NYS2d 624; see also Spencer v Christ Church Day Care Center, Inc., 280 AD2d 817, 720 NYS2d 633 (in order to recover for accumulated vacation time, at will employee must establish regular practice of paying employees unused vacation and reliance upon that practice in accepting or continuing position).”

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Although you might think that the answer to this question is really simple – it’s when both sides have a fully signed agreement – you’d be terribly mistaken.

So, here’s the rule, as recently summarized by a New York County trial court:

“The requirements for formation of an enforceable contract are:

(1) at least two parties with legal capacity to contract;

(2) mutual assent to the terms of an agreement with reasonably certain terms; and,

(3) consideration (i.e., payment).

(4 NY Prac., Com. Litig. in New York State Courts § 59:12 [2d ed.], quoting Cobble Hill Nursing Home, Inc. v Henry and Warren Corp., 74 NY2d 475, 482 [1989]).

But what on earth does that mean?

The first prong is relatively straightforward: I can’t sell you a property that I don’t own, nor can I sell you that property if I lack the mental capacity to make the sale (no jokes, please).

The second prong means that both parties reach a “meeting of the minds,” i.e., they both understand what their respective obligations are, and agree to do it. As a practical and legal matter, this is referred to as an “offer and acceptance,” both of which must be clearly made. Importantly, New York’s courts have long held that “assent may be implied when a party has conducted himself in such a manner that his assent may fairly be inferred.”

The  upshot is this: if there is a clear offer by one side, and the other party to the purported agreement starts acting on it in a way that clearly demonstrates their belief that there is an agreement, then guess what?

You’ve got an enforceable contract under New York law.

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In my earlier blog post “Why Fraudulent Concealment Claims Are So Tough to Win in New York,” I pointed out that one of the challenges of these claims is posed by contractual language that the purchaser signs stating that they didn’t rely on any representations by the seller. As a New York trial court recently noted,

“Where sophisticated businessmen engaged in major transactions enjoy access to critical information but fail to take advantage of that access, New York courts are particularly disinclined to entertain claims of justifiable reliance.” Grumman Allied Industries, Inc. v. Rohr Industries, Inc., supra at 737. Stated differently, “‘[a]s a matter of law, a sophisticated plaintiff cannot establish that it entered into an arm’s length transaction in justifiable reliance on alleged misrepresentations if that plaintiff failed to make use of the means of verification that were available to it.’ (UST Private Equity Invs. Fund v. Salomon Smith Barney, 288 AD2d 87, 88…[2001]).”

But what if the information that was concealed was within the unique knowledge of the seller?

In that case, the claim may not be D.O.A. after all; in legal terms, this is called the “peculiar knowledge” exception, which applies “not only where the facts allegedly misrepresented literally were within the exclusive knowledge of the defendant, but also where the truth theoretically might have been discovered, though only with extraordinary effort or great difficulty.” DIMON Inc. v. Folium, Inc., 48 F.Supp. 2d 359, 368 (SDNY 1999). See also, JPMorgan Chase Bank v. Winnick, 350 F.Supp. 2d 393 (SDNY 2004).

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