Source: https://www.pbwt.com/muhammad-usman-faridi/ny-commercial-division-blog/
Timestamp: 2019-04-19 15:01:36+00:00

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In 2017, the New York Commercial Division continued to implement new rules and refine existing rules in order to streamline litigation in the court. The year also saw some key decisions by the Commercial Division as well as appellate courts reviewing Commercial Division cases that developed an area of commercial law or applied existing law to a new or interesting set of facts. We covered all of these developments in this blog. We present here brief summaries of the most salient Commercial Division rule changes and cases from 2017 with links to our blog posts that provide more in-depth coverage.
The decision to bring a lawsuit on behalf of a corporation is entrusted to the corporation’s board of directors. A shareholder may not maintain a derivative lawsuit on behalf of a corporation without first making a demand on the board to bring the suit or pleading that it would be futile to make such a demand. On October 18, 2017, Justice Shirley Werner Kornreich of the New York Commercial Division dismissed a derivative lawsuit because the shareholder failed to allege that the defendant corporation’s board of directors acted in bad faith or with gross negligence when it rejected the shareholder’s demand. Reese v. Andreotti, No. 654132/2016, 2017 BL 391404, at *10 (N.Y. Sup. Ct. Oct. 18, 2017).
In Del Forte USA, Inc. v. Blue Beverage Group, Inc. et al., No. 518454/2016, 2017 BL 253248 (Sup. Ct. Jul. 17, 2017), New York Commercial Division Justice Sylvia G. Ash denied plaintiff Del Forte’s preliminary injunction motion that sought, pursuant to N.Y. Debtor and Creditor Law (“DCL”) § 279, to enjoin defendant Blue Beverage from selling 60% of Blue Beverage’s shares to co-defendant Kuzari Group for $5 million unless $500,000 is placed in escrow and a receiver is appointed. As an alternative form of relief, Del Forte sought, pursuant to CPLR § 6201, to attach at least $500,000 from the asset sale to satisfy a judgment that might be rendered in Del Forte’s favor.
A specialized list for blockbuster commercial cases in New York’s Commercial Division is under consideration. If designated as a Large Complex Case on the “Large Complex Case List,” the case will be subject to enhanced case management procedures designed to efficiently handle the matter. The proposal is subject to public comment. The Administrative Board of the Courts has requested that comments be submitted by Tuesday, July 25, 2017. If the proposal is adopted, the Large Complex Case List will be piloted in New York County.
Justice Charles Ramos of the New York Commercial Division partially vacated an International Chamber of Commerce (“ICC”) arbitration award in a major legal battle between artificial sweetener giants NutraSweet and Daesang. Daesang Corp. v. The NutraSweet Co., et al., No. 655019/2016, 2017 BL 164971 (N.Y. Sup. Ct. May 15, 2017). The partial vacatur sends what was a $100,766,258 award in favor of Daesang back to the arbitral tribunal.
In Norddeutsche Landesbank Girozentrale v. Tilton, No. 651695/15, 2017 BL 55790 (App Div, 1st Dep’t Feb. 23, 2017), a divided panel of the Appellate Division, First Department, affirmed a Commercial Division order that denied a motion to dismiss a $45 million fraud claim against Lynn Tilton, Patriarch Partners LLC (“Patriarch”), and two Patriarch affiliates, stemming from their management of two collateralized debt obligation (“CDO”) funds. Justices Richard T. Andrias and David B. Saxe dissented in part, opining that the majority should have dismissed the fraud claim as time-barred because the plaintiffs-investors were on notice of the alleged fraud more than two years before they filed suit.
Justice Timothy J. Dufficy in the Queens County Commercial Division recently entered an order dissolving a limited liability company owned by two brothers whose disagreements regarding the management of the LLC culminated in a physical altercation. Matter of Dissolution of 47th Road LLC, No. 705060/16, 2017 BL 49187 (Sup. Ct. Feb. 16, 2017). The court applied an exception to the general rule that disputes between members are insufficient to warrant judicial dissolution, and found that the antagonism between the brothers made it impracticable for the business to carry on.
In Good Hill Master Fund L.P. v. Deutsche Bank AG, No. 600858/10-2188B, 2017 BL 19363 (App. Div. 1st Dep’t Jan. 24, 2017), the First Department unanimously affirmed a judgment entered in the Commercial Division of over $90 million, a large portion of which included prejudgment interest at 21%. The judgment followed a nonjury trial before Justice O. Peter Sherwood of the New York County Commercial Division. The case was brought by two hedge funds against Deutsche Bank in connection with Credit Default Swap (“CDS”) agreements. The First Department rejected the bank’s arguments that the hedge funds acted in bad faith by renegotiating the terms of the underlying securitized notes to the detriment of their CDS counterparty, Deutsche Bank.

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