Nissenbaum Law Blog

May Courts Unilaterally Modify the Terms of an Oral Settlement Agreement to Which the Parties Agreed on the Record?

In Highland Capital Corp., v. Donna P. Denier M.D., P.C. et al., No. A-4832-10T4 (N.J. Super.  App. Div. 2013), Donna Denier, M.D. (“Defendant”) entered into a lease with Digirad Corporation (“Lease”) for a piece of equipment named “Cardius 1”. Id. at 2.  Highland Capital Corp., (“Plaintiff”) was the party that financed the Lease. Id.

This dispute arose when Defendant stopped making the agreed upon payments to Plaintiff. Id.  As a result of Defendant’s failure, Plaintiff sued her for breach of contract in the Law Division of the New Jersey Supreme Court (“Lower Court”). Id. Instead of proceeding with litigation, the parties entered into a settlement agreement. Id. at 3. Following discussions among each party’s counsel and the Law Division Judge, the parties orally placed the terms of their settlement on the record (“Settlement”). Id. Some of the main points of the Settlement were as follows:

1.      Defendant is to make monthly payments to Plaintiff in the amount of $2,778.00 plus tax for 36 months; and

2.      If Defendant made all monthly payments, at the end of the 36 months Plaintiff will transfer ownership of Cardius 1 to Defendant.

Id.

However, the parties were unable to agree on how best to put the terms of the Settlement in writing. Id. at 5. Unable to come to an agreement, the parties participated in a telephone conference with the Lower Court. Id. at 6. Based upon this conference, Plaintiff submitted a proposed written agreement to the Lower Court for signature. Id.  The Defendant objected, stating that it did not accept the terms of Plaintiff’s proposed written agreement. The Defendant argued that it encompassed different terms than those placed on the record (“Proposed Agreement”). Id. Nonetheless, the Lower Court signed Plaintiff’s Proposed Agreement. This meant that the Plaintiff’s terms of the agreement, which were not agreed to by Defendant, were now enforceable against Defendant. Id.

Defendant appealed to the Appellate Division of the Supreme Court of New Jersey (“Appellate Court”). Id. at 7.  In its appeal, the Defendant argued that the Lower Court did not have the authority to sign the agreement because she never consented to it and it “materially changed the terms of the settlement placed on the record.” Id.

In its analysis the Appellate Court explained that as a matter of public policy, New Jersey courts favor the enforcement of settlement agreements. Id. at 8.  This policy acknowledges the notion that the parties to a dispute are in the best position to determine how to resolve a contested matter in a way that is least disadvantageous to everyone. Id. Thus, courts strain to give effect to the terms of a settlement agreement wherever possible. Id.  Importantly, the Appellate Court noted that a settlement agreement does not have to be in writing to be enforceable “…the fact that an agreement is oral, rather than written, ‘is of no consequence.’” Id.

However, the Appellate Court explained that settlement agreements are contractual in nature. Id. at 9. Thus, no settlement agreement exists unless the parties agree to the essential terms of the agreement and manifest an intention to be bound by those terms. Id.  Appellate Courts do not have the power to modify and/or add to the terms of the settlement agreement. “It is not the court’s function to make a contract for the parties or to supply terms that have not been agreed upon.” Id. at 10.       

The Appellate Court explained that the terms of the Proposed Agreement was not an accurate representation of the Settlement the parties agreed to on the record. Id. at 12. For instance, under the Proposed Agreement, the Plaintiff was permitted to retain title to Cardius 1 and all proceeds of sale even if Defendant made all payments to Plaintiff in accordance with the Settlement. Id.  To the contrary, the Settlement indicated that the Defendant would retain ownership of Cardius 1, provided she made all payments to Plaintiff in accordance to its terms. The Appellate Court stated that the Lower Court unilaterally modified the terms of the Settlement. Id. The Lower Court’s improper modification of the Settlement clearly benefited the Plaintiff and harmed the Defendant.  Id.

Accordingly, the Appellate Court reversed the Lower Court’s approval of the Proposed Agreement. Id. at 13. In that regard, the Appellate Court directed the Lower Court to either form an agreement to which both parties agreed or, if the parties are unable to come to an agreement, simply to dismiss the case and enforce the terms of the original oral Settlement.   Id.

When is a Franchisor Required to Provide a 180-Day Notice of Termination of a Dealership Agreement Under the New York Franchised Motor Vehicle Dealer Act?

Compass Motors, Inc. (“Plaintiff”) was a franchised motor vehicle dealer for Volkswagen Group of America, Inc., (“Defendant”).  As a part of the dealership agreement, Plaintiff agreed to renovate its facilities pursuant to a Facility Renovation Agreement (the “Agreement”). The Agreement required Plaintiff to renovate its facilities in order to incorporate a Volkswagen-only showroom with a minimum of 1800 square feet and three offices. According to the Defendant, the Plaintiff failed to implement those required facility renovations. Id. at 284-285 As a result, the Defendant sent Plaintiff a 90-day notice of termination. The notice explained that if Plaintiff failed to cure the alleged breach within 90 days Defendant would terminate the dealership agreement between them.  Id.

Plaintiff commenced an action in the Supreme Court of New York (the “Court”), seeking a declaration that the notice of termination was invalid. Compass Motors, Inc. v. Volkswagen Group of America, Inc., 944 N.Y.S. 2d 845 (2012). Plaintiff argued that under the New York Franchised Motor Vehicle Dealer Act (the “Act”), particularly §463(2)(e)(3), Defendant was required to give it a 180-day, as oppose to a 90-day, notice to cure. In its analysis, the Court cited the relevant portions of the Act as follows:

¶463(2):

        (d) 

(1)  To terminate, cancel or refuse to renew the franchise of any franchised motor vehicle dealer except for due cause, regardless of the terms of the franchise. A franchisor shall notify a franchised motor vehicle dealer, in writing, of its intention to terminate, cancel or refuse to renew the franchise of such dealer at least ninety days before the effective date thereof, stating the specific grounds for such termination, cancellation or refusal to renew. In no event shall the term of any such franchise expire without the written consent of the franchised motor vehicle dealer involved prior to the expiration of at least ninety days following such written notice except as hereinafter provided.    

(e)

(3) The franchisor shall provide notification in writing to the dealer that the dealer has one hundred eighty days to correct dealer sales and service performance deficiencies or breaches and that the franchise is subject to termination under this section if the dealer does not correct those deficiencies or breaches. If the termination is based upon performance of the dealer in sales and services then there shall be no due cause if the dealer substantially complies with reasonable performance provisions of the franchise during such cure period and, no due cause if the failure to demonstrate such substantial compliance was due to factors which were beyond the control of such dealer.

Vehicle and Traffic Law, article 17-A §463 (emphasis added) 

The Court stated that subsection (2)(e)(3) which affords a breaching party notice that he or she has 180 days to cure prior to termination of the dealership agreement, by its plain terms, applies  only to notices to correct a dealer’s sales and service performance deficiencies or breaches. The Court explained that since Defendant’s notice of termination was based upon Plaintiff’s failure to properly renovate its facility in accordance with the Agreement, it had nothing to do with sales and service performance deficiencies or breaches. Therefore, the Court held that the 180-day notice requirement encompassed within §463(2)(e)(3) was not applicable. On this basis, the Court  concluded that the 90-day notice to cure was sufficient under the Act. Id. at 294-295.

Are Cooperative Associations Governed by the Nonprofit Corporation Statute?

According to Wikipedia, a utility cooperative has the following characteristics:

A utility cooperative is a type of cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications to its members. Profits are either reinvested for infrastructure or distributed to members in the form of "patronage" or "capital credits", which are essentially dividends paid on a member's investment into the cooperative.^[1]. Each customer is a member and owner of the business with an equal say as every other member of the cooperative, unlike investor-owned utilities where the amount of say is governed by the number of shares held.

http://en.wikipedia.org/wiki/Utility_cooperative

Will a utility cooperative be governed by the non-profit corporation statute? Denton County Electric Cooperative, Inc. d/b/a CoServ Electric v. Nicole Hackett, 36 S.W .3d 765 (2012) sought to answer this question.

In that case, the Court addressed whether electric cooperatives must adhere to the Texas nonprofit corporation’s code. The facts were straightforward. A class-action lawsuit was filed against Denton Electric Cooperatives, Inc. (“Defendant”) alleging that Defendant failed to provide open meetings; open records; and fair voting for board elections.  The trial court certified the class to proceed with the lawsuit based upon Texas’s non-profit corporation’s code. Defendant argued that the class certification was improper because that code did not apply to electric cooperatives.

The Texas Electric Cooperative Corporation Act (“ECCA”) applies to electric cooperatives. Plaintiff argued that since the ECCA does not state whether it governs all aspects of running a member cooperative, the nonprofit corporation statute would govern. On appeal, the Court explained two reasons why that statute did not apply to electric cooperatives:

(1) cooperatives were not similar enough to corporations, and

(2) the fact that the legislature deliberately chose to incorporate only two specific provisions of the non-profit corporation’s code implied that the legislature did not intend for that code to apply to electric cooperatives. 

Therefore, the Court of Appeals ruled that class certification was improper because the Texas non-profit corporation code did not apply to cooperatives.

Will a Court Recognize a Homeowner’s Challenge to a Bank’s Legal Right to Bring a Foreclosure Proceeding Based Upon Delay?

In Deutsche Bank Trust Co. v. Angeles, 53 A.3d 673 (2012), Yony R. Angeles (“Angeles”) executed a note with First Equity Financial Corporation and, in order to secure that note,  executed a mortgage on his home. About a year later, Deutsche Bank Trust Company Americas (Deutsche) filed a foreclosure complaint against Angeles in the Chancery Division of the New Jersey Superior Court ( “Lower Court”) because Angeles stopped making the required payments on the note. At the time Deutsche filed the complaint it was not the owner of the note and mortgage. Accordingly, a few weeks later, after Deutsche acquired ownership of the note and mortgage, it filed an amended complaint. Id. at 316-318.

The Lower Court entered default judgment against Angeles because he failed to properly respond to the complaint in a timely fashion. As a result, it ordered final foreclosure on Angeles’ residence.  However, a few months later, it temporarily stopped the sheriff’s sale from taking place and ordered the parties to participate in a court-sponsored mediation program. After the mediation program failed, the sheriff’s sale proceeded. At the sheriff’s sale, Deutsche purchased the property. Subsequently, Angeles’ filed a hardship application to prolong the eviction so his children could complete the school year. The Lower Court granted that application. After the completion of the school year, Deutsche stopped the eviction even longer so that it could negotiate a short sale of the property back to Angeles.

After negotiations failed, Angeles applied to the Lower Court for an order seeking to vacate the sheriff’s sale, stop Deutsche from conveying title to another, and permit him to either respond to the complaint or, alternatively, dismiss it for lack of standing.

Standing is a legal concept that requires a plaintiff to have a legally protectable stake or interest in order to commence a lawsuit. Angeles claimed Deutsche did not have standing because at the time Deutsche filed the original complaint it did not yet own the note and mortgage. The Lower Court rejected Angeles’ argument and denied his application. Shortly thereafter Angeles was evicted from his home. Id. at 317.

Angeles filed an appeal to the Appellate Division of the New Jersey Superior Court (“Court”). He argued that the Lower Court’s judgment was void and therefore could not be enforced because Deutsche lacked standing.  Angeles cited Deutsche Bank National Co. v. Mitchell, 422 N.J. Super. 214, 27 A. 3d 1229 (App.Div.2011). In that case, the court held that a plaintiff has standing if he had either:

(a)    possession of the note, or

(b)    the mortgage was assigned to him before the original complaint was filed.

Additionally, the Mitchell court stated that an amended complaint would usually be insufficient to overcome a plaintiff’s initial lack of standing. However, that impediment was overcome since the Michell defendant actively engaged in the litigation. For example, the defendant filed a timely and proper response to the plaintiff’s complaint. Importantly, the Mitchell court pointed out that the defendant contested plaintiff’s standing to file the foreclosure complaint long before the end of the litigation. Id. at 317-318.

In its analysis, the Court analogized its reasoning to New Jersey Court Rule 4:50-1 which governs the circumstances under which a litigant can seek relief from an order or judgment. The grounds upon which a party may seek to void a judgment pursuant to Rule 4:50-1 in the context of a foreclosure case are:

(a) mistake, inadvertence, surprise, or excusable neglect;

(b) newly discovered evidence which would probably alter the judgment or   order and for which by due diligence could not have been discovered in time to move for a new trial under Rule 4:49;

(c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party;

(d) the judgment or order is void;

(e) the judgment or order has been satisfied, released or discharged, or a prior judgment or order upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment or order should have prospective application; or

(f) any other reason justifying relief from the operation of the judgment or order.

Rule. 4:50—1.

The rule is designed to reconcile the strong interests in finality of judgments and judicial efficiency with the equitable notion that courts should have authority to avoid unfair results in any given case. It also stated that motions made under that rule must be filed within a reasonable time. Id. at 319. 

In its holding, the Court discussed its analysis on two levels. First, it acknowledged that Angeles’ argument that the final judgment was void for lack of standing was a valid concern since the complaint was filed prior to the assignment of the note and mortgage. However, it found that the standing argument would fail since Angeles had not definitively demonstrated that Deutsche lacked standing. The Court explained that if Deutsche had possession of the note, at the time it filed the original complaint, it had adequate standing. Id. at 319-320.

More importantly, the Court asserted that Deutsche’s position would prevail since, in foreclosure matters, equity (principles of what is fair and just) must be applied. The Court held that it would be inequitable to allow Angeles to void the judgment because:

• Angeles did not raise the issue of standing until he had the advantage of many years of delay;
• Angeles never denied his responsibility for the debt incurred; and
• Angeles could not reasonably argue that Deutsche is not the party legitimately in possession of the property. Rather, when all hope of future delay expired, after his home was sold and he was evicted, he made a last-ditch effort to relitigate the case.  

Id. at 320.

Accordingly, the Court upheld the Lower Court’s holding.  Therefore, the eviction of Angeles from his home was proper. The foreclosure judgment against Angeles remained in place. Id.

Is an Interactive Website Responsible for the Unlawful Uploading of Copyrighted Materials by Its Users?

Should a website be responsible for all of the material that is uploaded by its users? Under what circumstances should a website be liable for direct and/or secondary copyright infringement?  

These questions were addressed in Viacom Int'l, Inc. v. YouTube, Inc., 676 F.3d 19, 26-28 (2d Cir. 2012). That case involved a claim against YouTube (“Defendant”). As all of us know, it enables users to upload and view video clips free of charge. Before users are permitted to upload their videos they have to register. The registration process includes a “terms of use agreement” which states that the user “will not submit material that is copyrighted…unless [he is] the owner of such rights or ha[s] permission from their rightful owner to post the material and to grant YouTube all of the license rights granted herein.” Id. at 28.

This case arose when users nonetheless uploaded infringing material in derogation of the terms of use agreement. When YouTube was notified about the presence of infringing material, it took steps to remove it from the site. Nonetheless, Viacom and Premier League (“Plaintiffs”) filed suit against YouTube alleging direct and secondary copyright infringement.

The District Court denied Plaintiffs’ motion and granted summary judgment to Defendant. The District Court explained that YouTube qualified for Digital Millennium Copyright Act (“DMCA”) safe harbor protection with respect to all claims. The DMCA states that an Internet Service Provider (which includes a site, such as YouTube that hosts posts from unrelated third parties) is immune from suit when all it does is host the content without the requisite degree of knowledge that it is infringing. Once it has that degree of knowledge, it must remove the material under a procedure that provides both the poster and the aggrieved party to address the dispute.

Plaintiffs argued on appeal to the Second Circuit that general awareness of the presence of infringing material on Defendant’s site made them ineligible to receive safe harbor protection. Defendant argued that general awareness of infringement was not enough to remove internet service providers from the protection of the DMCA. Rather, specific and identifiable infringements of individual items were required. 

Thus, the issue on appeal was whether “actual knowledge” under the DMCA safe harbor 17 U.S.C. § 512 requires a general awareness that there are infringements, or rather means actual or constructive knowledge of specific and identifiable infringements of individual items.

The DMCA’s Online Copyright Infringement Liability Limitation Act, establishes a series of four “safe harbors” that allow qualifying service providers to limit their liability for claims of copyright infringement based upon;

(a) “transitory digital network communications,”

(b) “system caching,”

(c) “information residing on systems or networks at [the] direction of users,” and

(d) “information location tools.”

 17 U.S.C. § 512(a)-(d).

In its holding, the Second Circuit analyzed § 512(c)(1)(A) which states that the safe harbor will apply only if the service provider:

(i) does not have actual knowledge that the material or an activity using the    material on the system or network is infringing;

(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or

(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;

The Court explained that § 512(c) requires knowledge or awareness of specific infringing activity. It focused on the fact that under § 512(c)(1)(A) knowledge or awareness alone does not disqualify the service provider. Rather, the provider that gains knowledge or awareness of infringing material activity retains safe harbor protection if, under § 512(c)(1)(A)(iii), it acts expeditiously to remove or disable access to the material. The Court concluded that the nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material because “expeditious removal is possible only if the service provider knows with particularity which item to remove.” Id. at 30.

Ultimately, the Court held that YouTube was not liable for direct and/or secondary infringement. This is because “general awareness” was not enough to strip YouTube of its safe harbor protection. Additionally, the Court noted that YouTube took down infringing material in an expeditious manner when it did have “actual notice” of the presence of the infringing material.

If a Home Improvement Contract Violates the Requirements of the Consumer Fraud Act May the Contractor Recover for the Value of the Services Rendered?

The Consumer Fraud Act (“CFA”) aims to protect New Jersey consumers from unfair and unethical trade practices. In part, the CFA attempts to do this by requiring businesses to disclose certain information in writing when dealing with consumers. The CFA’s goal is to promote truth and fair dealing in the market place.            

In Gemini Restoration Inc. v. Dr. Joseph Leone, et. al., A-6171-09T4 (N.J.Super. App. Div., August 3, 2012), a dispute arose between a homeowner (“Defendant”) and a contractor (“Plaintiff”) in regard to the performance of home renovations. Defendant hired Plaintiff to perform extensive renovations on his home because Defendant’s architect and friend, Christine Miseo (“Miseo”), recommended him for the job. The original contract between the parties was for the estimated total of $221,735.55.  Id. at 2.

After Plaintiff began the renovations, Miseo sought a series of additions to the scope of the renovations. Plaintiff did not prepare a subsequent contract incorporating the additional work. However, he did submit to both Defendant and Miseo detailed bills reflecting the additional cost of labor and materials incurred each month. He submitted the bills to Miseo because Defendant explicitly told him that she was authorized to approve the bills each month. Indeed, she authorized various changes to the plan as the project progressed and accordingly, Plaintiff continued to work. Id. at 3-5.

Plaintiff sought payment from Defendant for the additional completed work that was not included in the initial contract. Defendant paid him for a portion of the additional cost; however he refused to pay Plaintiff the remaining $89,581.36.  Id. at 3. Plaintiff filed suit in the Law Division of the Superior Court of New Jersey (the “Lower Court”) against Defendant for the balance due on a theory of breach of contract. Defendant asserted the defense to that claim by alleging Plaintiff’s contract violated the CFA in his counterclaim.  

The Lower Court dismissed the breach of contract claim because it determined that the contract violated the CFA regulations that govern home improvement contractors. However, the Lower Court permitted Plaintiff to proceed under quantum meruit against Defendant. Quantum meruit is an equitable principle that allows a person to recover for the reasonable value of his or her services that he or she has rendered. It applies when there is, either, no contract or the contract is deemed unenforceable. Based on that principle, the jury returned a $92,000.00 verdict in Plaintiff’s favor. Id. at 1.  

Defendant argued that Plaintiff should not have been allowed to proceed to the jury under quantum meruit because he violated the CFA. The Lower Court rejected that argument. It explained that Defendant was prohibited, based upon notions of fairness (equitably estopped), from invoking the CFA against Plaintiff because he was the one who induced the behavior. For example, Miseo, as Defendant’s representative, approved the bills, did not object to the fairness of the bills, nor did she indicate to Plaintiff that he should cease performance of the renovations. Id. at 4.

Defendant appealed to the Superior Court of New Jersey, Appellate Division (the “Appellate Court”). The Appellate Court explained that the CFA regulations governing home improvement contracts required the changes to the terms and conditions of a home improvement contract to be in writing and signed by all parties. Also, the regulations required that time and material contracts must clearly state the hourly rate for labor along with all other terms and conditions of the contract that affected the price. Furthermore, it stated that a violation of the CFA regulations were a per se violation of the Act. Id.  A “per se” violation was a violation that was unlawful on its face, requiring no further inquiry into the facts. Id. at 5.

However, one may be equitably estopped from asserting the CFA as a defense to withhold payment from a general contractor when it would be unjust to do so. In its holding, the Court cited D’Edgio Landscaping v. Apicella, 337 N.J. Super. 116 (App.Div.2004). In D’Edgio, the defendant  homeowner was equitably estopped from invoking the CFA against a contractor because defendant was the one who insisted that a written contract was unnecessary in light of their longstanding relationship. Id. at 6.

The Court also referenced Messeka Sheet Metal Co. Inc. v. Hodder, 368 N.J. Super. 116 (App.Div.2004) in which the plaintiff-subcontractor sued the defendant-homeowner to collect on a bill for installing air conditioners. In Messeka, the homeowner was not the one who hired the plaintiff. Rather, it was the homeowner’s general contractor who hired and directly dealt with the plaintiff. Therefore, because the CFA was designed to protect homeowners who deal directly with contractors, the defendant could not assert the CFA as a defense.  Id.

Accordingly, in this case, the Court explained that Defendant was equitably estopped from bringing a CFA counterclaim because:

1)      Similar to the defendant in Messeka, Defendant interposed his construction professional, Miseo, as an expert intermediary between himself and Plaintiff. Therefore he was not a vulnerable consumer who needed the CFA’s protection;

2)      Plaintiff disclosed the amended work and the rates charged for that work;

3)      Defendant and Miseo were aware of those rates and Miseo approved them on behalf of the Defendant;  and 

4)      Miseo recognized the rates as fair and reasonable within the industry.  

Id. at 7-8.

Furthermore, the Court addressed Defendant’s argument that the Lower Court should not have allowed Plaintiff to proceed to the jury based on quantum meruit after determining that he committed consumer fraud. Id. at 14. The Court rejected Defendant’s argument. It stated that when a claim was stricken for failure to comply with the CFA regulations, the contractor could, under certain circumstances, proceed in quantum meruit. Thus, the Court upheld the jury verdict in favor of Plaintiff. Id. at 12.

Does the Government Violate the 4th Amendment When it Obtains Evidence From a Suspect’s Facebook Page?

Does the 4^th Amendment protect information disseminated online? Can Facebook posts be used against defendants in a court of law?

The court in U.S. v. Joshua Meregildo WL 3264501 (S.D.N.Y. August 10, 2012), addressed whether the government violated the 4^th Amendment by obtaining evidence from a suspect’s Facebook page. In that case, the government applied for a search warrant for the contents of Melvin Colon’s (“Defendant”) Facebook account. The Magistrate Judge found probable cause and granted the warrant. The basis of the finding of probable cause derived from the contents of Defendant’s Facebook page.

It was significant that one of Defendant’s Facebook friends granted the government access to view Defendant’s page. Through that access, the government learned that Defendant posted messages regarding prior acts of violence and threatened new violence to rival gang members. Additionally, the government obtained evidence that Defendant posted messages seeking to maintain the loyalties of other alleged members of Defendant’s gangs. Defendant argued that the government violated his 4^th Amendment right to privacy by accessing his Facebook page.

In its decision, the Court began its analysis by noting that the 4^th Amendment guarantees that all people shall be “secure in their persons, houses, papers, and effects, against unreasonable searched and seizures.” U.S. CONST. amend. IV.

A person has a constitutionally protected reasonable expectation of privacy when;

• they have both a subjective expectation of privacy; and

• that expectation is one that society recognizes as reasonable.

The Court reasoned that generally people have a reasonable expectation of privacy in the contents of their home computers. But this expectation is not absolute, and may be extinguished when a computer user transmits information over the internet or by e-mail. When a social media user disseminates his posting and information to the public, the user is no longer protected by the 4^th Amendment. However, when users utilize secure privacy settings when posting on the internet, it reflects the user’s intent to preserve information as private and may be constitutionally protected.

In this case, since the defendant set his Facebook privacy settings to allow viewership of postings by friends, the government was allowed to access them through a cooperating witness who was one of those friends. Id. at 1-2. 

The Court explained that Defendant was in error when he held the belief that his Facebook profile was private to law enforcement officials. This is because Defendant did not have a justifiable belief that his friends would keep his profile private. Once he shared his posts with his friends, his friends had the right to share it with law enforcement officials. Therefore, Defendant’s legitimate expectation of privacy ended when he disseminated posts to his friends.

Accordingly, the Court held that the government did not violate his rights under the 4^th Amendment when it accessed Defendant’s Facebook profile through a cooperating witness.

Be very careful what you post on the internet; Information is unlikely considered private when it is on the internet. If you want to ensure your privacy, do not post your “private” information online for anyone to see. 

Will a Loan be Discharged When the Lender Releases the Liens on the Collateral Prior to Ensuring That the Payoff Checks Have Cleared?

In JPMorgan Chase Bank, N.A., v. Jeffco Cinnaminson Corporation, et. al., No. A-2601-10T3 (N.J. Super. Ct. App. Div. March 27, 2012), JP Morgan Chase Bank, N.A.  (“Plaintiff”) sued Jeffco Cinnaminson Corporation (“Jeffco”) and Paul T. Andrews (“Andrews”) (collectively “Defendants”) based upon its premature disbursement of collateral held as security against two loans.

In that case, Plaintiff granted Jeffco two loans in order to acquire a Ford GT and a Ferrari (collectively the “Vehicles”). In regard to both loan agreements (collectively the “Agreements”), Andrews signed the Agreements as a cosigner which made him a guarantor of the debt. Id. at 4. Plaintiff disbursed the money and, in order to secure the loans, recorded liens on the Vehicles. Subsequently, Defendants entrusted the vehicles to Alfred Sciubba (“Sciubba”), who owned and operated a specialty car business named “Auto Toy Store.” He agreed to find buyers for the Vehicles.  Id. at 4.  

Sciubba found buyers for both vehicles. It provided pay off checks from Jeffco’s bank account to satisfy the car loans so the sale could be consummated (the buyers obviously would not want to purchase the cars with liens still recorded on the title). The problem arose when the Plaintiff bank endorsed the liens as paid before the check cleared. In fact it did this on two separate occasions, since the cars sold at different times. However, since neither check cleared due to insufficient funds in Jeffco’s bank account, Plaintiff was left with two unpaid and unsecured loans in Jeffco’s and Andrews’ names. Id. at 6-7. 

As a result, Plaintiff filed suit in the Law Division of the Superior Court of New Jersey  (“Lower Court”) against Jeffco and Andrews to recover the amounts due. Defendants argued that because Plaintiff had failed to protect the collateral, their two loans were discharged. They also filed a counterclaim which alleged that Plaintiff was negligent because it should not have endorsed both liens as paid before either of the checks had cleared. Id. at 7-8.

Subsequently, Plaintiff filed a motion for summary judgment and Defendants filed a cross motion for summary judgment. A motion for summary judgment allows a Court to determine a case without resort to a trial when there are no material issues of fact and judgment can be granted by applying the relevant law.

Defendants’ submitted to the Court an expert report and opinion. The expert opined that Plaintiff’s release of the liens violated financial industry standards and was contrary to its policies and procedures. Further, the expert asserted that it failed to properly monitor and manage the Jeffco loan portfolio after the first payoff check (for the Ford GT) bounced. Id. at 8-9.

The Lower Court stated that Plaintiff “implicitly knew” Sciubba was in the business of selling cars because it received a check from “Auto Toy Store.” It reasoned that because Sciubba regularly sold cars to the public, that alone was a sufficient basis for the Plaintiff to reasonably believe that the checks received from him were adequate and sufficient. Thus, it asserted that it was proper for Plaintiff to have endorsed the liens as paid before the checks had cleared. Further, the Lower Court stated that Defendants could not complain about Plaintiff’s release of the liens because they had set in motion the very facts that led to the consignment of the vehicle to the dealership.

Accordingly, the Lower Court granted Plaintiff’s motion for summary judgment against Defendants for the amounts due plus approximately $40,000.00 in attorney’s fees. Id.

Subsequently, Defendants appealed to the Superior Court of New Jersey, Appellate Division (the “Appellate Court”). In its analysis, the Appellate Court considered Plaintiff’s argument based upon Chapter Nine of the New Jersey Commercial Code (the “UCC”). It claimed that whenever an “innocent purchaser” is involved in the acquisition of an automobile, the rights of a secured lender, almost instantaneously (and inexorably), must bend to the will of the buyer.  Id. at 11-12. The Court rejected that argument.

It explained that under N.J.S,A. 12A:9-315(a)(1) and (2), a properly filed and recorded lien was not extinguished when the secured property was transferred to another, unless an exception to the UCC applied. One such exception is N.J.S.A. 12A: 9-320(a) because it automatically severs the lien so that the purchaser of the goods enjoys them with clear title; free of any liens due to their seller’s debt. Id.at 14.   For example, if you purchased a new coat from a department store you will own that coat without any fear that the department store’s creditors have any rights in them.  N.J.S.A. 12A: 9-320(a) stated:

Except, as otherwise provided in this subsection (e), a buyer in the ordinary course of business, other than a person buying farm products from a person engaged in farming operations, takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.  

(emphasis added) Id.

Further, the Court noted that the UCC did not require a secured lender to blindly release a lien without conducting reasonable due diligence; including ensuring that the proffered payoff is sufficient to extinguish the outstanding amount due on the loan. Id. at 13.

In its analysis, the Court explained several reasons why the Lower Court’s grant of summary judgment in favor of Plaintiff was improper. Some of those reasons were:

• Contrary to the Lower Court’s conclusion, Plaintiff could not have implicitly known that the entity transmitting title to the vehicles was in the business of selling vehicles because it never received a check from the Auto Toy Store. Rather, Plaintiff received a check from Jeffco who was not an entity that was in the business of selling motor vehicles at the time Plaintiff received the checks. Id.

• The security interests in this case were created by Jeffco and Andrews, not the Auto Toy Store. Since, the buyers of the Vehicles were dealing with Auto Toy Store, not Jeffco and Andrews, the provision did not apply to them. Thus, those buyers would have taken free of any security interest created by Auto Toy Store (the buyer’s seller), but not those created by Jeffco and Andrews. Therefore, that argument was immaterial.  Id. at 15.

• There was no requirement in the UCC that mandated a speedy release of Plaintiff’s security interests in the Vehicles. In light of Defendant’s expert’s opinion, it was possible that had the Plaintiff waited a few more business days, instead of robotically processing the lien releases, its discovery of the checks’ dishonor might have enabled Defendants to prevent the conversion of the purchase proceeds. Id.

Since many questions of fact remained open for the trier of fact to determine, the Appellate Court reversed the grant of summary judgment in favor of Plaintiff, vacated the reallocation of attorney’s fees without prejudice, and remanded back to the Lower Court. Id. at 21.

 

Does Interference with Someone Filming a Documentary About Police Interaction with Gang Members in Public Violate the Rights Afforded to that Person Under the NJ or the U.S. Constitutions?

In September 2012, the Appellate Court of New Jersey held that “the right to engage in news gathering for the purposes of creating a documentary concerning a matter of public interest is protected by the First Amendment and the New Jersey Constitution . .  . .” Ramos v. Flowers, No. A-4910-10T3 (N.J. Super. Ct. App. Div. September 21, 2012).

In that case, a documentary filmmaker (“Plaintiff”) was working on a project about gangs in Trenton, New Jersey.  On several occasions, a police officer (“Defendant”) made Plaintiff stop filming public encounters between the police and gang members. Id. at 17-19.  For example, on one occasion Plaintiff went to the Trenton Public Library to film a police investigation regarding a meeting between gang members on its premises. Id. When Defendant noticed he was filming, Defendant took his camera from him and put it in his police vehicle. Plaintiff claimed that Defendant threatened to lock him up if Defendant saw him again.  Id. at 18.

Plaintiff filed a complaint against Defendant in New Jersey Superior Court, Law Division (“Lower Court”). Plaintiff alleged in his complaint that Defendant interfered with his free speech rights under both the New Jersey (“State”)  and United States (“U.S.”) Constitution.  Id. at 19. In response to his complaint, Defendant filed a motion for summary judgment.

Summary judgment allows a court to determine the outcome of a case without proceeding to trial. Basically, it may be granted when it was clear to the court, based upon the pleadings (e.g. complaint and answer), that there is no issue of material fact and judgment can be determined as a matter of law.  The Lower Court granted Defendant’s motion for summary judgment resulting in a dismissal of Plaintiff’s case before it could proceed to trial. Plaintiff then appealed to the Superior Court, Appellate Division (“Court”).

First, the Court addressed the First Amendment to the U.S. Constitution, which states in part,

Congress shall make no law… abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

 U.S. Const. amend. l; Id. at 24.

The Court cited cases standing for the proposition that the First Amendment protects the media’s right to gather news.  Otherwise the freedom of press could be severely deprived of its essential purpose.  Id. at 24-25. For example, one purpose of the First Amendment is to protect the right to receive information. This includes the right to gather news from any source by means within the law.  Id. at 30.

Next, the Court addressed Plaintiff’s claim based on the New Jersey State Constitution, which states,

Every person may freely speak, write and publish his sentiments on all subjects, being responsible for the abuse of that right.  No law shall be passed to restrain or abridge the liberty of speech or of the press.

N.J. Const. art. I, ¶ 6; Id. at 25.

The people have the right freely to assemble together, to consult for the common good, to make known their opinions to their representatives, and to petition for redress of grievances.

N.J. Const. art. I, ¶ 18; Id.

Citing those provisions, the Court noted that the State Constitution provided broader protection for freedom of speech than the U.S. Constitution. Further, it observed that the freedom of press is strongly protected under the State Constitution. Id. at 25-26. It explained that a documentary about a subject of public interest, such as urban gangs, was a form of investigative journalism, and the process of preparing such a documentary was a form of news gathering. Thus, as a recognized form of journalism, a documentary is entitled to the strong protection afforded to the press.  Id.

In support of that proposition, the Court elaborated that the filming of government officials engaged in their duties in a public place, including police officers performing their responsibilities, fits comfortably within those principles.  Gathering information about government officials in a form that can readily be disseminated to others serves a cardinal constitutional interest in protecting and promoting the free discussion of governmental affairs. Id. at 30. Accordingly, those activities are protected by the First Amendment of the United States Constitution and the New Jersey State Constitution. Id. at 26.

Accordingly, the Court reversed the Lower Court’s dismissal of Plaintiff’s complaint. However, it did note that Plaintiff’s activity was subject to reasonable place, time and manner restrictions, as long as the restrictions were: content neutral; narrowly tailored to serve a significant governmental interest; and left open ample alternative channels for communication of the information. Id. at 32.  

Are New York Property Owners Entitled to Common Law Indemnification for a Third Party’s Injury by a General Contractor if That General Contractor Did Not Control or Supervise the Worksite?

In McCarthy v. Turner Construction, Inc., 17 N.Y. 3d. 369 (2011), Boston Properties, Inc. and Time Square Tower Associates, LLC (collectively “Property Owners”) leased a retail storefront to Ann Taylor, Inc. (“Ann Taylor”). Subsequently, by agreement (the “Agreement”), Ann Taylor engaged a general contractor, John Gallin & Son, Inc. (“Gallin”) to perform construction on its storefront.  The Agreement stated that Gallin was solely responsible for and in control of the construction and was required to take reasonable safety precautions to protect the workers from injury. Id. at 372.

However, Gallin did not perform the construction itself; Gallin engaged Linear Technologies Inc. (“Linear”) as its subcontractor.  Shortly thereafter, Linear hired Samuels Datacom, LLC (Samuels) as its sub-subcontractor. An electrician employed by Samuels (“Plaintiff”) was injured when he fell from a ladder while working on the project site. Subsequently, he brought an action in the Supreme Court of New York (“Lower Court”) for his injuries against Gallin and the Property Owners. Id. The Property Owners asserted a cross claim against Gallin for common law indemnification. Id. at 373. Indemnification is a legal concept that enables a defendant the right to be reimbursed for some or all costs associated with the suit by another person or entity.

The Lower Court held that the Property Owners and Gallin were vicariously liable for Plaintiff’s injuries. Vicarious liability is a legal concept that holds a third party responsible for the acts of another solely because of his or her relation to the actual wrongdoer. For example, under certain circumstances an employer could be held vicariously liable for his or her employee’s unlawful conduct.  

Property Owners and Gallin  reached a settlement under which they each paid the Plaintiff $800.000.00. The settlement itself was not in dispute. Instead, the question  before the Court was whether the Property Owners could recoup some or all of that money from Gallin.

The Lower Court rejected the Property Owners’ cross claim for common law indemnification because Gallin was not actively at fault in bringing about the injury. Id. at 373. Thus, the Lower Court held that Gallin was not required to reimburse the Property Owners for some or all of the $800,000.00 they paid to Plaintiff.

The Property Owners appealed to the Supreme Court of New York, Appellate Division (“Appellate Court”). The Appellate Court affirmed the Lower Court’s holding.

The Property Owners appealed to the Court of Appeals of New York (the “Court of Appeals”). In their appeal, they argued that they were entitled to common law indemnification by Gallin, whether or not Gallin directly supervised and controlled Plaintiff’s work, based upon the Agreement. Id. at 374. That was the central issue before the Court of Appeals: whether a person or entity that does not supervise or control another can be liable to indemnify for the damages that party causes.

First, the Court of Appeals considered Labor Law §240(1) which imposes upon owners and general contractors and their agents a nondelegable duty to provide safety devices necessary to protect workers from the risks inherent in elevated work sites. Further, the Court of Appeals noted that  §240(1) holds owners and general contractors absolutely liable for any breach of the statute, even if the job was performed by an independent contractor whom they did not supervise nor control.

Having said all of that, the Court of Appeals nevertheless held that a general contractor’s authority to supervise the work and implement safety procedures was not a sufficient basis for requiring common law indemnification. It explained that liability for indemnification may only be imposed against parties who exercised actual supervision. Thus, the Court asserted that a common law indemnification claim did not lie against a party who had contractual authority to direct and supervise the work at a job site but never exercised that authority because it subcontracted its contractual duties to another.  Id. at 378.

The Court of Appeals also noted that an owner or general contractor, who was not at fault for the misconduct, still has the right to seek full indemnification from the party who was actually responsible for the accident.  Id.  A party’s right to indemnification may not only arise from a contract but may have also be based upon equity (what is fair and proper between the parties). Common law indemnification is generally available in favor of an innocent party who was held vicariously liable for the wrongdoing of another.  Id. at 375.

In its analysis, the Court explained that although the Agreement required Gallin to supervise and direct the work at the worksite, such a provision was insufficient to establish that Gallin actually supervised or directed Plaintiff’s work. The Court noted that this was especially so considering the following facts:

1. Gallin had no supervisory authority over Samuels’ (Plaintiff’s employer’s work) work.
2. Gallin would not have directed Plaintiff as to how to perform his work.         and
3. Gallin did not provide any tools or ladders for the subcontractors that worked at the site.

Id.

Therefore, the Court affirmed the dismissal of Plaintiff’s cross claim for common law indemnification, holding that Gallin did not actually supervise, nor direct, Plaintiff’s work. Id. Thus, Gallin did not have to compensate the Property Owner for any of the $800,000.00 they paid to Plaintiff in order to settle his personal injury claim.