Comments on Recent Cases: August 2020

Part of my work involves reading court decisions to keep abreast of how judges decide the types of cases I handle. Below, I share some thoughts on recent decisions.

Court Dismisses RICO Claim Where Plaintiff Failed to Allege an “Association in Fact”

Private litigants can sue organizations for participating in a fraudulent scheme and can recover triple the amount of money they lost, pursuant to RICO, the Racketeer Influenced and Corrupt Organizations Act.

But pleading a RICO violation is complicated and many complaints are dismissed at an early stage of litigation.  For example, an appeals court in Atlanta recently affirmed the dismissal of a RICO claim against a group of pet stores, alleging that they conspired to sell sick pets for inflated prices.  Among the reasons for the dismissal, the court held that plaintiff failed to allege that the other defendants (besides the one defendant that sold her pet) took concrete actions to participate in the scheme to thus failed to allege they comprised an “association in fact” with a common purpose to carry out a fraud.  Without such an association of participants, the court dismissed the RICO claim.

Litigants should explore the possibility of RICO claims, especially with the high damages those claims could bring.  But cases like this one should remind litigants only to pursue RICO cases if the facts meet the high procedural standards set forth in the statute.

Courts Require Signed Agreements in Certain Cases

Parties often do not need a signed document to form a contract. They can agree orally or by email to purchase goods to perform services, and courts may enforce those agreements if they can be proven. But courts do require signed documents in certain specific situations.  

One of those situations is amending a limited partnership agreement in New York. In a recent decision, an appellate court in Manhattan heard a case involving a partnership that drafted an amendment to its partnership agreement, and that acted in several ways as if the amendment was in effect, but never signed the amendment. It noted that parties normally can modify their contracts without a writing, just by their conduct. But it held that limited partnerships are governed by a statute that requires that, unless their agreement says otherwise, amendments are only effective with the “written consent of each partner adversely affected.” Thus, without a written agreement, the amendment was void.

Decisions like this one should caution people to put their agreements in signed writings and to review the applicable law to make sure their terms are enforceable.

New York Courts Enforce Agreements Without End Dates for a “Reasonable Time”

In New York, contracts that do not specify a date in which the contract ends, or a mechanism to end the contract, continue for a “reasonable time.” But what does that mean?

In a recent decision, an appellate court in Manhattan reversed the dismissal of a lawsuit based on a contract with no written end date. It held that, to determine whether the contract is still in effect, the parties needed to present evidence of how long the parties originally intended the contract to last and whether the defendant is still receiving a meaningful benefit from it. And it cited a case from New York’s highest court that held that a contract that was silent about its duration did not last forever, but was still enforceable fifty years after it was made.

I found this case to be interesting since the parties were all large, sophisticated financial institutions, and so they likely should have known to write into the contract their understanding of how, and when, the contract would end.

Court Decisions Help Litigants Assess Damages in Discrimination Claims

In my work, I represent clients both pursuing and defending against discrimination claims. One major challenge in advising clients about those claims is calculating the monetary damages at issue. It’s hard to put a dollar amount on the impact of discrimination, including the resulting emotional distress. And it’s hard for parties to reach a settlement without a common understanding of the amount a trial court would award.

The best resource I have are court decisions that set an amount of compensatory damages. But since most cases do not proceed to trial, and since every case has unique facts, these decisions rarely provide a dollar amount that everyone agrees applies to other cases. In one recent decision, a federal court in Manhattan ordered that surgeons that did not operate on HIV positive patients pay $125,000 per patient for violating the Americans with Disabilities Act. That provides some basis for parties in future cases to estimate the damages a court would award and therefore negotiate a settlement accordingly, but not a definitive one that will reliably apply in dissimilar cases.

Court Denies Specific Performance to Party that Did Not Properly Invoke Clause in Real Estate Agreement

Real estate disputes are some of the most challenging in litigation. Real estate law is very technical, and the applicable sales and lease agreements are also very complex. Moreover, the industry is volatile and transactions often do not go forward as planned.

Purchasers of real estate often ask courts to grant them “specific performance,” or a court award of real property instead of money damages. In one recent Manhattan appellate court decision, the court denied specific performance to a buyer who discovered at a real estate closing that the seller had misrepresented the tax liability of the building it was selling. Among the reasons it denied the claim, the buyer did not properly invoke the clause of the contract that could have entitled it to that relief.

Cases like this are important illustrations why anyone preparing a major transaction should do extensive due diligence to confirm they know what they are buying, and to carefully review the applicable agreements to make sure they are properly exercising their rights.