Dissolving A Partnership | Creditors’ Rights | Discrimination

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Get Me Out Of Here!: Dissolving A Partnership

Get Me Out of Here!: Dissolving A PartnershipIn Gelman v. Buehler, 20 N.Y.3d 534, 964 N.Y.S.2d 80 (2013), the highest court in the State of New York held that a certain partnership formed by oral agreement was capable of being dissolved unilaterally by one of the two partners, as the partnership agreement did not specify a “definite term” or “particular undertaking” in the underlying agreement. According to N.Y. Partnership Law § 62(1)(b), a partnership may be dissolved “by the express will of any partner when no definite term or particular undertaking is specified” in the partnership agreement. The Court of Appeals explained that a “definite term . . . is intended to be durational in nature and refers to an identifiable date,” and a “particular undertaking . . . require[s] a specific objective or project that may be accomplished at some future time, although the precise date need not be known or ascertainable at the time the partnership is created.”

The plaintiff in Gelman argued that the partnership agreement set forth a “particular undertaking,” and therefore the partnership was incapable of being unilaterally terminated by the defendant. However, the Court held that the partnership agreement was “fraught with uncertainty” and too indefinite to be categorized as having a “definite term” or “particular undertaking.” As the court described it, the business plan was to “(1) raise money; (2) identify a business to buy; (3) raise more money to purchase the business; (4) operate the business to increase its value; (5) achieve the liquidity event [i.e. pay back the investors]; (6) sell the business; (7) secure profit from the sale.” The Court of Appeals compared this “business plan” to the one in St. Lawrence Factory Stores v. Ogdensburg Bridge & Port Auth., which “identified the specific purpose of the partnership as the development and construction of a retail factory outlet center on an identifiable parcel of real property, and held that it was not sufficiently detailed and certain to be classified as a “particular undertaking.” As a result, the Court of Appeals reversed the First Department’s decision, and dismissed the Plaintiff’s complaint for breach of the parties’ oral partnership agreement.

Of course, a proper written partnership agreement would avoid this kind of litigation.

Winning is Only Half the Battle: Judgment Creditors’ Rights

Winning Is Only Half T he Battle: Judgment Creditors’ RightsAs many litigants have found, winning a court case is sometimes only half the battle. Collecting on the judgment is often just as difficult, and is certainly just as important. Recently the highest court of the State of New York answered a question of first impression, which now makes it more difficult for creditors to satisfy judgments.

In Commonwealth of N. Mariana Islands v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55, ___ N.Y.S.2d ___ (April 30, 2013), the New York State Court of Appeals held that a court cannot issue a turnover order to an entity which does not have actual possession or custody of a debtor’s assets, even if a subsidiary of that entity might.

The plaintiffs in Commonwealth obtained two judgments of over eighteen million dollars each, for unpaid taxes against former residents, in the United States District Court for the Northern Mariana Islands. After registering the judgments in the Southern District of New York, plaintiff commenced a proceeding as a judgment creditor seeking the turnover of assets held by the debtors. The plaintiff named the Canadian Imperial Bank of Commerce (“CIBC”) as a garnishee under the theory that the debtor maintained accounts in subsidiaries of CIBC, namely an affiliate entity in the Cayman Islands of which CIBC was a 92% owner. The Commonwealth argued that because “CIBC has the control, power, authority and practical ability to order [the Cayman affiliate] to turn over funds on deposit in the name of the [debtors],” that the court should grant a turnover order. The federal Court recognized that this “case turned on unresolved issues of New York law,” and certified the question of whether “a court [can] issue a turnover order pursuant to NY CPLR § 5225(b) to an entity that does not have actual possession or custody of a debtor’s assets, but whose subsidiary might have possession or custody of such assets,” to the New York State Court of Appeals for resolution.

Under CPLR Article 52 a judgment creditor may commence a special proceeding for a turnover order, which is the mechanism by which it then can enforce a judgment against an asset of a judgment debtor, held in “possession or custody” of a third party. CPLR § 5225(b). The Commonwealth argued “that the phrase ‘possession or custody’ inherently encompasses the concept of control and, therefore, section 5225(b) is applicable to garnishees with constructive possession of a judgment debtor’s assets.” The court aptly rejected this position, stating:
[I]t is clear that the legislature did not pen one word anticipating that another would be “read into” the CPLR. When the legislature has sought to encompass the concept of “control” it has done so explicitly, evincing a legislative intent to exclude consideration of “control” from those sections from which it is omitted. For example, CPLR 3111, which concerns the production of discovery materials, provides that “books, papers and other things in the possession, custody or control of the person to be examined” should be produced. CPLR 3119(a)(4)(ii) similarly provides that a subpoena may be used to order a person to produce discovery “in the possession, custody or control of the person.” We are led to the conclusion that the legislature considered “control” and “custody” to refer to distinct concepts.

The rule of law is now settled; mere control is insufficient. A CPLR section 5525(b) “turnover order cannot be issued against a garnishee lacking actual possession or custody of a judgment debtor’s assets or property.”

“Unfair Treatment” Is Discrimination, But It’s Not Necessarily Unlawful

“Unfair T reatment” Is Discrimination, But It’s Not Necessarily Unlawf ulRecently in Seabrook v. CUNY, 13 Civ. 3191 (BMC) a federal court in the Eastern District of New York dismissed an action of employment discrimination under Title VII of the Civil Rights Act of 1964. The Civil Rights Act of 1964 is the landmark civil rights legislation in the United States that outlawed major forms of discrimination against racial, ethnic, national and religious minorities, and women. It addressed, among other things, unequal treatment at the workplace based upon these protected persons.

In this case, the plaintiff alleged that in 2008 he received threats from a coworker who had previously assaulted him with a deadly weapon while they were both incarcerated. Although the plaintiff reported these threats to his supervisor, there was no resolution to this coworker dispute. Instead, the plaintiff alleges that he received “unreasonable workloads impossible to complete and assigned at the time [he] was due to ‘clock out.’” The complaint further alleged that the “working conditions” coupled with the fear he experienced as result of the coworker’s threats made him afraid of going to work on a daily basis and compelled him to turn down over-time work. He concluded that he was terminated from his employment without any explanation less than one month after he filed a charge of discrimination with the Equal Employment Opportunity Commission. He claimed the discrimination was based on “race” and “national origin.”

The federal Court recognized that “Title VII prohibits an employer from discriminating against any individual with respect to ‘compensation, terms, conditions, or privileges, of employment, because of such individual’s race, color, religion, sex or national origin.’ To establish a prima facie case of Title VII discrimination, a plaintiff must show that: (1) he is a member of a protected class, (2) he was qualified for the position he held, and (3) suffered an adverse employment action (4) under circumstances giving rise to an inference of discrimination.”

In applying this standard to the allegations of the complaint, the Court concluded that the complaint failed to state a claim for Title VII discrimination. In so holding, the Court stated:

There is nothing in the law that prohibits an employer from treating an employee unfairly unless the reason for the unfair treatment is racial or national origin discrimination. Most of plaintiff’s complaints, both before this Court and the EEOC, pertain to either his burdensome work conditions or his altercations with another employee. Plaintiff has in no way alleged that his supervisor’s demands or the supervisor’s failure to resolve his conflicts with another employee are the basis for any race or national origin-based discrimination. Plaintiff’s complaint further fails to state a claim because he provides only a passing reference to any discriminatory conduct: (1) that he requested, at some point in time, and was denied, full-time work, while a Caribbean native who was hired after plaintiff was hired, was granted full-time work; and (2) that he was terminated one month after filing an EEOC charge of discrimination. These conclusory statements, devoid of even an allegation that plaintiff is a member of a protected class, and wholly lacking in relevant details, are not sufficient to state a claim under Title VII. The complaint is therefore dismissed.

Title VII is not a general code of civility in the workplace that will always protect employees from harsh employers, hostile work environments or unfair treatment. There must be a connection between these difficult working conditions and an underlying motive to discriminate against someone in the protected class, to be actionable under Title VII.

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