Court of Appeals February Session: Arguments of Interest for February 13, 2018

The Court of Appeals is back for a 2-day week of arguments to wrap up the February Session at Court of Appeals Hall. The Court has 3 cases on the argument docket today (the Court’s case summaries can be found here), the highlight of which finds former Court of Appeals Judge Victoria Graffeo in her debut as an advocate before the Court squaring off with former New York Solicitor General Caitlin Halligan, now with Gibson Dunn. The issues before the Court today include: (1) whether a stop and frisk was justified where the criminal defendant furtively tried avoid the police, then when he was stopped, refused to answer questions, and the police officer saw a bulge up his sleeve; (2) whether, in determining the value of a partnership interest for purposes of Partnership Law § 69(2)(c)(ii)—to buy out the interest of a partner who has wrongfully caused the dissolution of the partnership to allow the partnership to continue—a minority discount may be applied to reflect the lack of control a minority partner has in the operations of the partnership; and (3) whether a motion to dismiss based upon documentary evidence was properly denied where email communications were unclear whether the parties agreed to the material terms of an employment contract.

No. 30      Congel v Malfitano

This case is interesting not only for the issues it presents and the impact it can have on corporate law in New York, but also for who is arguing it.  Former Court of Appeals Judge Victoria Graffeo, who Governor Cuomo unceremoniously declined to reappoint her to the Court at the end of her 14 year term (even though she had not reached the age of mandatory retirement, and most of her predecessors had been reappointed), is back!  Judge Graffeo makes her first appearance before the Court in an advocate’s role since returning to private practice after her time on the Court concluded. And she’s facing off with one of New York’s most formidable foes, former New York Solicitor General (and DC Circuit appointee who never received consideration from Congress) Caitlin Halligan. Should be a fun one to watch!

At issue in the case is whether a partnership was wrongfully dissolved by a single partner, instead of the majority, and whether in valuing the dissolving partner’s share a minority discount should be applied. Two really interesting issues of partnership law, a subject that doesn’t reach the Court of Appeals all that often.

Supreme Court held that Malfitano had, in fact, wrongfully dissolved the partnership, because the partners’ agreement didn’t allow for unilateral dissolution. The Appellate Division, Second Department affirmed that holding, further noting that the mere fact that the agreement didn’t specify a specific time period for the partnership to continue didn’t make it terminable at will, because it provided that the partnership would continue until a majority of the partners elected to end it. That’s a definite term, the Court held.

After a trial on damages, the Appellate Division, Second Department held that a minority discount should be applied to account for the fact that Malfitano, as a minority partner, couldn’t force the partnership to liquidate its assets (a shopping mall). The Court, though, relied primarily on a case from the Supreme Judicial Court of Massachusetts in doing so. The question now is whether New York law permits the same result.

The Appellate Division, Second Department’s order can be found here.

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