Security Deposit | Duty of Care | FMLA

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Security Deposit Under The Lease Had To Be Applied In A Way Most Favorable To Landlord

Important Lease Language Defeats Di smissal Of A Holdover Proceeding

In 360 Motor Parkway v. The Mortgage Zone, we successfully moved for summary judgment against a commercial tenant and subtenant alleging breach of lease, sublease, and a letter agreement. This, in and of itself, is not an unusual case for this firm, but what makes this case important is the Court’s conclusion that, given the language of the lease, the Landlord could apply the security deposit in way most favorable to collecting the total money owed, due to breach by both the tenant and subtenant.

The action arose out of a breach of a written lease agreement entered into by the tenant Mortgage Zone. Mortgage Zone contracted for the entire rental space of a building located at 360 Motor Parkway. The lease was to have a duration of 10 years and 6 months, the term of which was to expire on April 30, 2017. Article 31 of the lease provided: “(i) Tenant shall pay to Landlord all Rent, additional rent and other charges payable under this lease by Tenant to Landlord to date upon which lease and the Demised Term shall expire … (ii) Tenant shall also be liable for and shall pay to Landlord, as damages, any deficiency … between the Rent and additional rent reserved in this lease for the period which otherwise would have constituted the unexpired portion of the Demised Term, etc.”

Additionally, Article 32 provided: “Sums Due Landlord. … if Landlord is compelled to or elects to [incur] expense, including reasonable attorney fees, instituting, prosecuting and/or defending any action or proceeding instituted by reason of any default of Tenant hereunder, the sum or sums so paid by Landlord, with all interest, costs and damages, shall be deemed to be additional rent here under and shall be due from Tenant to Landlord….”

As the Court noted, the “terms of the agreement clearly provide in the event of a default by the Tenant, such Tenant would remain liable for the rental balance owed, along with interest on that balance, reasonable attorneys’ fees and expenses incurred as a result of Tenant’s default.”

Additionally, under Article 49 of the lease, Mortgage Zone “simultaneously with the execution of this lease … delivered to Landlord an unconditional, irrevocable, stand-by letter of credit …in the amount of $850,000 to serve as security for the full and faithful performance and observance by Tenant of all of the terms and conditions, covenants and agreements of this lease.”

At the time the action was commenced, the rental balance owed to plaintiff amounted to more than $1,094,350.23. The Court noted: “It remains uncontested that the letter of credit posted by Mortgage Zone will be insufficient to cover the plaintiff’s damages by more than $200,000.” At that time rent continued to accrue month to month until the expiration of the lease in 2017.

Before its breach, Mortgage Zone had sublet the entire premise to Ideal Mortgage. The sublease provided that Ideal Mortgage shall pay to Mortgage Zone rent equivalent to the amount of base rent and additional rent to be paid by Mortgage Zone to the Landlord under the terms of the Lease. Additionally, as a condition of the sublease, all parties (landlord, tenant and subtenant) entered into a letter agreement dated February 7, 2008 agreeing to the following:

It is expressly agreed and acknowledged by Tenant and Subtenant that Subtenant shall assume all obligations of Tenant under the Overlease as such obligations affect the Subleased Premises. Such parties further expressly agree and acknowledge that the Sublease, and Landlord’s consent thereto, shall in no way be deemed to release Tenant of any obligations under the Overlease.

In the event of a default, Ideal Mortgage agreed to remain liable for the rental balance, reasonable attorneys’ fees and expenses incurred due to its default. However, the sublease gave Ideal Mortgage the right of termination, with 30 days’ notice, if an employment relationship between Ideal Mortgage and the branch manager of the building was terminated. This condition occurred and the right of termination was exercised through a letter dated April 21, 2008, terminating the sublease as of May 31, 2008. Ideal Mortgage did not dispute that it had failed to pay the sum of $99,171.74 for the May 2008 rent or that the terms of the lease and sublease make it directly liable for any unpaid rent through the date of termination.

Instead, it argued that the language of the lease requires that the letter of credit posted by Mortgage Zone, when drawn upon, to be used to satisfy existing debts before being applied to future injuries of the landlord. Ideal Mortgage argued that the May 2008 debt had been satisfied by the letter of credit and the landlord was “not entitled to a windfall judgment.”

The Court disagreed finding that the clear language of the security clause governed the issue. It provided:

In the event Tenant defaults in payment of Rent, Additional Rent, or other sums due from Tenant to Landlord under this Lease Landlord may notify the Issuing Bank and thereupon draw upon the Letter of Credit, in whole or in part, at Landlord’s election, and use, apply or retain the whole part of such monies to the extent required for the payment of sums as to which the Tenant is in default (including, without limitation, any damages or deficiencies accrued before or after summary judgment proceedings or other re-entry by the Landlord or for coverage or reimbursement of any sums which Landlord may expend or may be required to expend by reason of such default by Tenant.)

Relying upon this language, the Court concluded, “even when facts are construed most favorably to the defendant, and it is assumed the Landlord has drawn down upon the letter of credit, Ideal Mortgage still remains liable for the unpaid May rent. The lease clearly provides the Landlord may ‘use, apply or retain such monies to the extent required for the payment of sums the Tenant is in default.’ Such language clearly allows Landlord to apply the letter of credit in a way most favorable in collecting the total money owed due to the breach of both Tenant and Subtenant. Specifically, Article 49 under the lease states the letter of credit is to be used ‘to serve as security for the full and faithful performance and observance by Tenant of all terms, conditions, covenants and agreements under the lease.’ Even when the letter of credit is applied to the unpaid rent a deficiency of more than $200,000 exists.”

Accordingly the Court held: “Based on the foregoing, the Courts determines that the letter of credit must be applied in a way most favorable to the plaintiff, to minimize the losses caused by the breaching Tenant and Subtenant,” and it granted summary judgment.

No Duty Of Care To Student And Father Assaulted Outside School Grounds

No Duty Of Care To Student And Fath er Assaulted Outside School Grounds

In Hernandez v. City of New York, a student and her father brought a negligence action against City and its Education Department, seeking recovery for injuries allegedly sustained when they were both assaulted outside school grounds. The Supreme Court, Queens County, granted summary judgment to the City and Education Department and the student and her father appealed. The Second Department of the Appellate Division affirmed the summary judgment.

The complaint alleged that the City and Education Department were negligent in failing to provide the student with adequate supervision and in failing to provide both the student and her father with adequate security. However, because the assaults took place approximately 30 to 100 feet beyond the school’s entrance, and off school grounds, there was no such duty.

As for the student, the Court recognized that “a school’s duty is coextensive with, and concomitant with, its physical custody and control over a child. ‘When that custody ceases because the child has passed out of the orbit of its authority in such a way that the parent is perfectly free to reassume control over the child’s protection, the school’s custodial duty also ceases.’ ‘As a result, where a student is injured off school premises, there can generally be no actionable breach of a duty that extends only to the boundaries of school property.’” Because at the time of the incident the student was no longer in the City’s or Education Department’s custody or under their control and was, thus, outside the orbit of their authority, there could be no liability.

The Court also concluded that there was no basis to impose liability for failure to provide adequate security to the student or her father, since the City and Education Department demonstrated that they did not affirmatively assume a duty to protect either of them “from criminal activity which occurred off the school premises.”

FMLA Applied To Care For A Grandparent

Employee Did Not Plausibly Asse rt His Firing Was Due to Race , Color or National Origin

In Coutard v. Municipal Credit Union, an employee, Frantz Coutard, who was denied leave to care for his seriously illgrandfather, and who was eventually terminated from his position after being absent without leave, filed suit against his employer, Municipal Credit Union (“MCU”), alleging it violated and interfered with his rights under the Family and Medical Leave Act (“FMLA”). The United States District Court for the Eastern District of New York, granted MCI summary judgment and dismissed the complaint on the basis that Coutard had failed to provide the necessary information about the type of relationship he had with his grandfather sufficient to determine eligibility for FMLA leave.

According to the decision, Coutard sought leave under the FMLA to care for his grandfather Jean Manesson Dumond. Coutard had alleged that Dumond had raised him as his son from before the age of four, after Coutard’s father died, until Coutard was approximately 14. Dumond acted in all respects as Coutard’s father—feeding him, clothing him, paying for his education, taking him to school, and providing emotional and social support. Dumond referred to Coutard as his son. In January 2013, Dumond—who had suffered a stroke in 2011—lived with Coutard, was 82 years old, and suffered from a number of chronic medical conditions, including diabetes, hypertension, asthma, prostate cancer, high cholesterol, and heart disease. On the evening of January 22, 2013, Dumond was taken to a hospital by ambulance; he was diagnosed with bronchitis, and was discharged on January 23. Coutard, believing that Dumond was seriously ill and should not be left unattended, determined to stay home and care for him until Coutard could secure the assistance of a home health aide, and he sought FMLA leave to do so. MCU denied him leave, and when he remained at home to care for Dumond, MCU terminated his employment.

On appeal, the Second Circuit Court of Appeals reversed the lower court decision, holding that “because Coutard met the eligibility requirements for FMLA leave and requested that leave expressly to care for his seriously ill grandfather, it was MCU as an employer covered by the Act who had the obligation to specify the additional in formation that it needed in order to determine whether he was entitled to such leave.

With respect to “Entitlement to leave,” the Court explained that the “FMLA provides in part that (subject to the employer’s right to request certification from a health care provider), an eligible employee shall be entitled to a total of 12 workweeks of leave during any 12–month period for one or more of the following: … (C) In order to care for the spouse, or a son, daughter, or parent, of the employee, if such spouse, son, daughter, or parent has a serious health condition. The term ‘parent’ is defined to include not only the employee’s biological parent but also ‘an individual who stood in loco parentis to an employee when the employee was a son or daughter,’; ‘son or daughter,’ to the extent pertinent here, is defined to include ‘a child, of a person standing in loco parentis, who is … under 18 years of age.’”

The Court then explained that “covered employers must conspicuously ‘post … a notice, to be prepared or approved by the DOL, setting forth excerpts from, or summaries of, the pertinent provisions of the Act,’ and that it is ‘unlawful for any employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under the Act.’”

With respect to what “notice” an employee must give to his employer under the FMLA, the Court concluded, after careful analysis of the relevant regulations, that “the obligation of an employee to give notice of his need for FMLA leave is not the obligation, imposed by the district court on Coutard, to provide the employer with all of the necessary details to permit a definitive determination of the FMLA’s applicability at or before the time of the request. Rather, in the absence of a request for additional information, an employee has provided sufficient notice to his employer if that notice indicates reasonably that the FMLA may apply.” “The question is not whether the information conveyed to the employer necessarily rules out non-FMLA scenarios. The question is whether the information allows an employer to ‘reasonably determine whether the FMLA may apply.’ Reasonableness does not require certainty, and ‘may’ does not mean ‘must.’”

Therefore, the Court concluded that the lower court erred in ruling that Coutard was required, at the time of his request, to provide MCU with all of the information it needed to determine with certainty that his requested leave was within the FMLA.

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