American Indian Lawsuit | Revoking Guardianship | Down Payment Forfeited

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Cigarette Trafficking Lawsuit Dismissed Against American Indian

Cigarette Trafficking Lawsuit Dismissed Against American Indian

In State of New York v. Mountain Tobacco Company et al., 12-CV-6276, 2016 WL 324970 (E.D.N.Y. 2016), this firm successfully obtained the dismissal of all claims asserted by the NY Attorney General (“AG”) against our client, an American Indian owner and president of a private tobacco company located on the Yakama Indian Reservation in Washington State. The AG alleged that the sale of unstamped and unreported cigarettes by our client’s company to wholesalers and retailers on other Indian reservations located throughout New York violated the Federal Contraband Cigarette Trafficking Act (“CCTA”) and Prevent All Cigarette Trafficking Act (“PACT Act”), as well as several New York tax laws. Alleging that no stamping agent has reported sales of such cigarettes to the State Department of Taxation and Finance, the AG sought an injunction to prevent such sales, and to recoup more than $100 million in unpaid cigarette taxes.

We filed a motion to dismiss the Complaint against the owner, asserting that the U.S. District Court in New York did not have “personal jurisdiction” over him, and that the AG had also failed to “state a claim” against him under the governing statutes. We pointed out that one of those statutes, the CCTA, expressly provides that a State Attorney General may not commence an enforcement action “against an Indian tribe or an Indian in Indian country” (see 18 U.S.C. § 2346(b)(1), and that the PACT Act only applies to sales of cigarettes to “consumers” (which does not include wholesalers/retailers). The Court addressed only the personal jurisdiction issue.

In determining whether a Federal court sitting in a particular state has “personal jurisdiction” over a non-domiciliary, the Federal court generally applies the forum state’s rules governing such jurisdiction (which is known as long-arm jurisdiction). The governing New York rule generally permits a court to exercise personal jurisdiction over a non-domiciliary “who in person or through an agent” transacts any business in the state, commits a tortious act in the state, or commits a tortious act outside the state causing injury in the state if he regularly does business or derives substantial revenue from the goods used in the state. At all times, the burden of establishing personal jurisdiction rests with the plaintiff, but at the pleading stage of a case, before any discovery has been taken, that burden is relatively light.

In an initial ruling in the case, the Court agreed with our argument that the AG had failed to meet even the lowest burden of establishing personal jurisdiction over our client, and that the AG did not sufficiently establish that his tobacco company had engaged in activities in New York for his personal benefit. As the Court noted, the main question is whether the out-of-state corporate officer was a primary actor in the transactions in New York that gave rise to the litigation. It concluded that the AG’s Complaint failed to allege anything specific regarding the owner’s relationship those transactions, other than that he was the president of the company. Nonetheless, the Court held in that initial ruling that it would permit the AG to take “jurisdictional discovery” “so that the State may develop a record relevant to the extent of [our client’s] contacts with New York State.”

Following jurisdictional discovery, which included the taking of our client’s deposition, we renewed the motion to dismiss. The Court then issued a second ruling in which it agreed with our contention that, since the AG had now taken discovery, his burden of establishing personal jurisdiction had to meet a higher standard of proof. The Court concluded that the AG had failed to meet this burden, cautioning that “control [over the alleged transactions that took place in New York] will not be established based merely upon a defendant’s title or position within the corporation, or upon conclusory allegations that the defendant controls the corporation.” The Court held that its review of the owner’s deposition transcript did not support the AG’s contention that he was involved in the sales transactions alleged in the Complaint, let alone that he was the “primary actor” in these transactions.

Noting that the AG had already been provided “multiple opportunities” to establish a basis for personal jurisdiction, the Court dismissed the Complaint against our client “with prejudice.” In light of its finding that there was no personal jurisdiction, the Court declined to reach the merits of our other argument that the Complaint failed to state a claim against our client because he is, among other things, an “Indian in Indian Country.” The resolution of that restriction in the CCTA statute and the “consumer” restriction in the PACT Act remains for another day.

Guardian Ad Litem Takes Action

Guardian Ad Litem Takes Action

In Matter of Gianni V, a guardian ad litem moved to revoke letters of guardianship of the infant’s property that were issued to an aunt, and for, among other things, a judgment of liability against her and New York Community Bank.

Under New York Law, a “guardian” is a person who has the legal authority to care for another’s person or property, when it is judicially determined that the person can no longer do so for themselves — or, in the case of a minor, when the parent(s) is unable, as a result of a mental incapacity, illness, disability or death. The guardian has same authority and powers over a minor as their parent with respect to education, medical care, financial matters and the general welfare of a child, among other things.

The guardian, however, has no claim to the child’s property or money. Thus, in the event that a minor passes away without a Will, the parents still receive any assets that the minor’s estate had, not the guardian. The child’s relationship with any living parent still remains the same. Further, guardians must be 18 years of age or older, a legal resident or a citizen of the United States, and are typically a relative or close friend of the minor. In the event a minor is a party to a litigation, a “guardian ad litem” (“GAL”) is assigned, and authorized to act on behalf of the minor.

Here, after the death of the infant’s mother, the aunt was granted custody of the infant pursuant to an order of the Family Court, Bronx County, and was appointed guardian of the infant’s property by court decree upon consent of the infant’s father. The infant presently resides with the aunt in Florida. “By decree entered June 26, 2006, the Supreme Court compromised an action arising from the wrongful death of the infant’s mother and directed that the net distributable proceeds payable to the infant, the sole distributee of the mother’s estate, be deposited in equal sums in 12 guardianship accounts for the infant’s benefit.” An “infant’s compromise” is a civil proceeding or motion for obtaining court approval of the settlement of an infant’s claim. Legally, an “infant” is a person under age eighteen. In New York State, an infant’s case cannot be settled without the approval of a judge, not even if the parent wants to accept the settlement.

As reported by the Court, “when the aunt filed annual accounts for only 2006 and 2007 and failed to respond to communications from Court personnel, the Court suspended the aunt’s letters and appointed the GAL to investigate.” Later, the GAL reported he communicated with the aunt, but she subsequently failed to cooperate in the investigation regarding annual accounts. The GAL reported 11 of the 12 accounts were intact, except one with New York Community Bank, which became dormant and the bank stopped paying interest, deeming the funds abandoned and remitted same to the Office of the Comptroller.

The GAL sought judgment against the aunt and NYCB for lost interest and legal fees incurred in securing the funds back for the infant. The Court granted the application finding NYCB and the aunt jointly and severally liable for lost interest, and counsel fees for her failure to protect the infant’s property. But the determination as to whether to revoke the letters of guardianship was held in abeyance “pending a further report by the guardian ad litem as to whether a suitable successor property guardian in New York can be identified and/or whether the addition of a co-guardian who is a New York domiciliary knowledgeable about maintaining bank accounts and filing the requisite documents with the court is possible.” In the meantime, the letters of the guardianship of the infant’s property issued to the aunt remain suspended by the Court.

Seller Entitled To Keep Down Payment

Seller Entitled To Keep Down Payment

In Feldshteyn v. Brighton Beach 2012, LLC, the buyers sought the return of their $55,000 down payment for the purchase of a condominium unit, and parking space, at a development known as Brighton by the Sea Condominiums in Brooklyn. They failed to close on the deal and the seller retained the down payment as liquidated damages, pursuant to the purchase agreement. The seller’s motion to dismiss the action was granted and it was allowed to keep the down payment.

Most real estate contracts in New York contain a provision entitling a seller to keep the down payment as “liquidated damages” if the purchaser refuses to close for a reason not contemplated in the contract of sale. This provision is routinely upheld by the courts.

Here, the buyers argued they did not appear for a scheduled closing on April 22, 2013, because they thought the closing date was set for April 28, 2013. They also claimed it was represented to them by the seller that the subject parking space associated with the purchase could accommodate two cars, but in reality could only accommodate one. Also, the buyers argued that their engineer discovered various building code violations in the unit.

The contact of sale, however, was clear. The price was $550,000, and pursuant to its terms, the buyers gave the seller a down payment of $55,000. It also provided that “purchaser has been given an opportunity to examine the architectural plans for the above unit and for the building in which it is located.” The contract authorized one adjournment of the closing date of up to 10 days. It made the adjourned closing date “time of the essence,” providing “this means the Purchaser must close by the adjourned date. In the event that Purchaser does not close on the adjourned date, Purchaser may risk the loss of his or her Down Payment.”

The contract further stated: “If Seller elects to cancel this Agreement on account of Purchaser’s default, (I) Seller may retain all sums deposited by Purchaser hereunder…as liquidated damages…and upon retaining such sum, this Agreement shall be terminated and neither party shall have any further rights, obligations or liabilities or against the other and the parties shall be released and discharged from all obligations and liability under this Agreement and the Plan.”

The contract set February 5, 2013 as the closing date. The seller’s attorney, on March 20, 2013, sent a “Time of the Essence Notice” to the buyers’ real estate attorney scheduling the closing for April 22, 2013, with the seller “willing and able to deliver the Deed, transfer documents and all documentation in accordance with Contract of Sale.” The notice further provided that “if Purchaser does not tender the full balance of proceeds as required by the Contract of Sale, then the Purchaser shall be deemed to have materially defaulted and the down payment will be retained by Seller as liquidated damages. In such event the contract of sale shall be deemed cancelled.”

The Court found the buyers failed to provide documentary evidence showing the closing date as April 28, and did not provide a copy of their engineer’s report. Also, it noted there was nothing in writing showing the subject parking space could accommodate two cars. Because the buyers’ complaint made allegations that were clearly contradicted by the seller’s documentary evidence, the buyer was held to have defaulted, entitling the seller to retain the down payment.

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