Pete's Take

Booze And Boating Don't Mix (But They Do Lead To An Interesting Discussion Of Negligent Entrustment)

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Some sets of facts just seem tailor-made for a potential lawsuit. Climbing up a ladder with a chainsaw to cut your neighbor's tree limbs that are hanging over your lawn comes to mind.  Also on that list, a day out on a boat with your friends from the local bar, more than a few beers, and a jet-ski. Those were the basic facts in Votor-Jones v. Kelly. In that case, what started out as a fun day out at sea for a group of friends became a very bad day for plaintiff and an opportunity for the court to opine on the rarely-invoked tort of negligent entrustment.

In Kelly, plaintiff was "one of seven employees and patrons of Kelly's Tavern invited on a social trip organized by the tavern's owner and plaintiff's boyfriend." While plaintiff described the event as a "bar outing," it was not the more formal, "large scale " "customer appreciation days" that the bar had organized in the past. Instead, it was "small and planned the night prior at the suggestion of the boat's operator." Each attendee was required to bring their own food and alcohol. To that end, plaintiff and her boyfriend testified that, on the morning of the cruise, they went to the bar and fulled their cooler with approximately 24 beers and a bottle of wine. The group had a total of four or five coolers like this on the boat.

The attendees had a "tacit agreement" that they would not drink until 4pm, but some apparently ignored this agreement. One defendant acknowledged that she was drinking prior to boarding the boat and plaintiff testified that she saw this woman have "at least three beers on the dock" before the cruise began. Once the cruise started, this same woman was seen with a beer in her hand and was described by plaintiff as being "loud," "boisterous," and "excited." Plaintiff conceded that she did not know if the woman was drunk, but did see her "wobbling on the boat, as was everyone else."

"I'm strong to the fin-ich. Cause I eats me spin-ach. I'm Popeye the . . . debt collector man?"

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

For lawyers, debt collection can be a trap for the unwary. The Fair Debt Collection Practices Act ("FDCPA") governs debt collection by both attorneys and non-attorneys. It generally prohibits debt collectors from using deceptive, abusive, or unfair practices to collect debts. While that sounds straightforward, it is often difficult to figure out whether you are even a debt collector governed by the FDCPA, much less whether what you are trying to collect is a debt under the FDCPA and whether what you are doing to collect that debt is deceptive. And the consequences for running afoul of the FDCPA -- statutory damages and attorney's fees -- can be significant.

A recent decision from the U.S. Court of Appeals for the Third Circuit, Tepper v. Amos Financial, LLC, offered a good primer on one of these tricky issues -- whether a party that buys debt and seeks to collect that debt for its own account qualifies as a debt collector under the FDCPA -- but the more interesting aspect of the opinion is the court's frequent references to Popeye (the sailor man, not the fast food restaurant).

The opinion began: "Many would gladly pay Tuesday for a hamburger today." This, of course, is a reference to Wimpy's famous tag-line in Popeye. The court then described the basic purpose of the FDCPA and introduced the issue in the case as follows:

The Act does not apply . . . to all entities who collect debts; only those whose principal purpose is the collection of any debts, and those who regularly collect debts owed another are subject to its proscriptions. Those entities whose principal place business is to collect the defaulted debts they purchase seek to avoid the Act's reach. We believe such an entity is what it is - a debt collector. [Emphasis added.] If so, the Act applies.

Understandably, the court was not willing to go so far as have the defendant declare "I yam what I yam, and that's all that i yam," but you get the point. Popeye references continued throughout the opinion, so keep reading. 

Lawyer Loses Challenge To Rule Limiting The Amount Of Time He Could Speak At City Council Meeting

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

There is a lawyer joke in here somewhere about lawyers suing to get more time to speak or how someone should sue to force lawyers to talk less. Potential jokes aside, the issue in Feld v. City of Orange was an interesting one. In Feld, plaintiff challenged a municipal ordinance that reduced, from ten minutes to five minutes, the time members of the public could speak on certain matters at city council hearings. Plaintiff claimed that this ordinance violated his First Amendment right to free speech. Spoiler Alert: He lost. But the issue and the decision are nonetheless interesting. 

Feld was the latest chapter in litigation that has been raging between plaintiff, a lawyer, acting on behalf of himself and his parents' business, and the City of Orange for years. (In a prior decision, the Appellate Division noted that plaintiff considered himself a "zealous gadfly" and a "radical barrister.") At some point during this long-running battle, the city adopted an ordinance "that reduced the time from ten minutes to five that individual members of the public could speak at City Council meetings on general  issues, agenda items or second readings of ordinances before adoption." The city council claimed the change was necessary because "council meetings can extend late into the evening or early into the next day" and this "discourages, if not precludes[,] a fair opportunity to be heard by other members of the public." The city council further claimed that, "without appropriate and rational limitations, the rights of all public speakers [would be] curtailed and undermined." The city council also noted that other municipalities limited the time for speaking during public meetings to five minutes.

The underlying issue in Feld involved plaintiff's objection to the city council's adoption of a resolution that allowed the mayor to sign a lease and option to buy a building owned by the YWCA of Orange, which was in bankruptcy. He challenged the resolution when it was before the city council, and, after it passed, filed a 257 paragraph complaint in lieu of prerogative writs seeking to have it invalidated. As part of this complaint, he also challenged the rule reducing the amount of time members of the public could speak at city council hearings. After filing his complaint, plaintiff filed an order to show seeking, among other things, to restrain the city from enforcing the five-minute rule while the lawsuit was pending. The trial court heard oral argument on the order to show cause, and took testimony from a witness on behalf of the city, who testified that the rule was necessary to "administer the Council meetings more efficiently," and that it was an attempt to "make sure that all of the comments are heard and that everyone gets a chance to talk."

Party That Drafted Arbitration Provision Moves To Have Provision Deemed Unenforceable. It Lost.

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Most cases involving commercial contracts and arbitration provisions follow a similar pattern. They generally involve consumers arguing that they cannot be bound by arbitration clauses found in the fine print of boilerplate contracts that they had no ability to negotiate. But Shah v. T & J Builders, LLC turns this scenario on its head. In Shah, plaintiffs, the consumers, drafted the contract that contained the arbitration clause but later argued that it was unenforceable. To make matters worse (or at least more unusual), plaintiffs took this position after participating in an arbitration proceeding with defendant for two years. Not surprisingly, plaintiffs efforts to have their own arbitration clause deemed unenforceable were unsuccessful.

In Shah, plaintiffs hired defendant to build an extension on their home. The contract, which was "heavily negotiated between the parties," albeit without counsel, was drafted by plaintiffs. It contained an arbitration clause that required the parties to arbitrate "any dispute [ ] relative to the performance of [the] contract that [they could not] satisfactorily resolve." After one such dispute arose, plaintiffs terminated the contract and defendant filed an arbitration demand. Plaintiffs answered the demand and filed a counterclaim, alleging breach of contract and violations of New Jersey Consumer Fraud Act. Nowhere in their answer or counterclaim did plaintiffs address, much less challenge, the arbitration clause.

The parties, through counsel, then pursued their claims in arbitration for almost two years, exchanging discovery and expert reports, participating in a site inspection, and participating in several conferences with the arbitrator. Two weeks before the scheduled arbitration date, the parties submitted their pre-arbitration briefs. This is where the fun began. 

A New Twist On Who Gets The House When The Relationship Ends

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

If you read this blog then you know that failed relationships often make for the most interesting cases. For example, if your would-be spouse calls off your wedding, then you are usually entitled to get the engagement ring back. But, if you cancel your wedding reception, you may not be entitled to a refund from the venue where it would have taken place. And, of course, if your ex-wife agreed to pay all "utilities" under a divorce settlement but fails to pay for water filtration services that remained in your name and you get sued by the water filtration company, your ex-wife will be required to reimburse you for those charges. Now, Burke v. Bernardini can be added to this list.

In Burke, plaintiff and defendant were involved in a "romantic relationship." (They had actually known each other for 25 years before they began dating.) While they were dating, plaintiff bought property on which he built a house where he and defendant lived together. He paid approximately $368,000 for the property and another $100,000 for improvements and additions. Both plaintiff and defendant contributed furnishings.

Before buying the property, the parties entered into an agreement that provided:

[Plaintiff] acknowledges and agrees that [defendant] has provided, and will continue to provide[,] companionship to him of an indefinite length. [Plaintiff] promises and represents that upon closing, the home shall be deeded and titled in the name of "[plaintiff] and [defendant], as joint tenants with the right of survivorship."

(As a side note, only in the hands of a lawyer does "'til death do us part" become "I agree to provide companionship of an indefinite length.") The agreement also provided that defendant would have no "financial obligations for the home, including, but not limited to, property taxes, homeowners association fees, and homeowners insurance."  

Dog (Bite) Days Of Summer, Part II: Home Inspector Bitten While Inspecting Home Can't Sue Realtor

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Last week, I wrote about an exception to the strict liability normally imposed on dog owners under New Jersey's dog bite statute. (A short time before that, I wrote about yet another exception to strict liability under the dog bite statute, so the exceptions are obviously more interesting than the rule.) This post is about a different dog bite case, Ward v. Ochoa, with a similar result even though it was not decided under the dog bite statute. Ward involved a home inspector who was attacked and severely injured while performing a home inspection. She sued the dog owners (who eventually settled) along with the real estate agency and real estate agent who were selling the house. Like the dog groomer in last week's post, however, the home inspector's claims were dismissed.

Dog (Bite) Days of Summer, Part I: Owners Usually, But Not Always, Strictly Liable For Dog Bites

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

As dog owners in New Jersey know, or should know, they are usually strictly liable for injuries suffered by anyone bitten by their dogs. New Jersey does not follow a "one free bite rule." Instead, under New Jersey law: "The owner of any dog which shall bite a person while such person is on or in a public place, or lawfully on or in a private place, including the property of the owner of the dog, shall be liable for such damages as may be suffered by the person bitten, regardless of the former viciousness of such dog or the owner's knowledge of such viciousness."

There are, however, exceptions to this rule. For example, trespassers, who are obviously not "lawfully on or in a private place," cannot sue under the dog bite statute. A different exception was at play in Carpentiero v. Pocknett, where a dog groomer was bitten in the face by a dog while bathing the dog. In that case, defendant brought her dog to Katie's Pet Depot, where plaintiff, an independent contractor, worked as a part-time pet groomer. Plaintiff testified that had she been advised that the dog was old and had arthritis, she would have "muzzled the dog prior to grooming." But she was never told that, therefore she did not muzzle the dog, and, while she was bathing the dog, she was bitten in the face.  

The Pipes, The Pipes Are . . . Frozen! (Or, Who Is Liable For Property Damage While Home Buyer And Home Seller Wait For The Final Check To Clear?)

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Although the temperature today is supposed to reach 90 degrees, this post is about frozen pipes. More specifically, pipes in a house that is under contract for sale that freeze and cause property damage after the scheduled, but not completed, closing, but before the buyer takes possession of the home. In a case like that, who is liable for the damage?

In Bianchi v. Ladjen, plaintiff was under contract to buy a home. It was an all cash sale, no mortgage was involved. The closing was scheduled for New Year's Eve. Plaintiff performed a walk through on the morning of the closing and reported no damage to, or issues with, the home. The closing could not be completed as scheduled, however, because plaintiff did not wire the balance of the purchase price to the title company prior to the closing as he had been instructed to do. Instead, plaintiff brought a certified check to the closing. As a result, the parties entered into an escrow agreement, which provided that the title company would hold  "all closing proceeds" and the "Deed & Keys" in escrow until the check cleared.

This is where it gets tricky.  

Court Enforces Codicil Written In Decedent's Blood (Yes, You Read That Correctly)

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

I never took trusts and estates in law school because I thought it would be boring. Had I known that there were cases like In the Matter of The Will of E. Warren Bradway, then I might have felt differently. The Appellate Division's opinion in that case begins: "This appeal arises out of a dispute concerning a holographic codicil to a will, written with the blood of the decedent, E. Warren Bradway." If you are intrigued, and how could you not be, please read on.

In Bradway, decedent was in a long-term relationship with defendant. They lived together and filed documents with the Philadelphia Commission on Human Relations recognizing their relationship as life partners. While they were together, decedent executed a will that named defendant as his primary beneficiary and executor of his estate.

Three years after executing the will, the relationship ended. Both decedent and defendant moved on to new relationships. Decedent filed a certified life partnership termination statement with the Philadelphia Commission on Human Relations and, on the same day, drafted a one-page codicil to his will. The codicil named decedent's new partner as his primary beneficiary and executor by directing that all references to defendant in the prior will be replaced with his new partner's name. Oh, and decedent "drafted the codicil using his own blood as ink." 

New Jersey Court Answers The Burning Question: Can I Sue The Owner Of An Abandoned Church If I Slip And Fall On The Sidewalk Outside The Church?

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

The facts and legal issues in sidewalk slip and fall cases sometimes read like they are pulled from law school final exams. In New Jersey, the baseline legal rule is clear -- owners of commercial properties generally have a duty to maintain, in reasonably good condition, the sidewalks abutting their property, while owners of residential properties do not. But does a property owner have a duty to maintain its sidewalks when:

• the property is both residential and commercial, like a multi-family home where one unit is owner occupied and the others are rented (click here for more on that, but the short answer is that it depends on whether the property is primarily residential or primarily commercial ); or
• the plaintiff is a tenant and sues the landlord after slipping on a sidewalk outside the rental property (click here for more on that, but usually, yes); or
• the property is a commercial property, final judgment of foreclosure has been entered in favor of the lender, but no sheriff's sale has been scheduled (click here for more on that, but if the lender can be considered a mortgagee in possession, then yes); or 
• the property is owned by a condominium or common-interest community (click here for more, but generally, yes if it's a private sidewalk within the condominium, no if it's a public sidewalk abutting the condominium); or
• the property is residential and the fall is caused by sweetgum spikey seed pods that fell from a tree on the defendant's property (click here, but, no).

And now one more can be added to the list thanks to the Appellate Division's decision is Ellis v. Hilton United Methodist Church, where the question presented was whether "sidewalk liability applies to an owner of a vacant church."

Arbitration Provision Bounced Again, Even After Kindred Nursing Decision.

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

As readers of this blog know, arbitration provisions in consumer contracts are difficult to enforce in New Jersey. (Click here or here for a refresher.) There was some belief that the U.S. Supreme Court's recent decision in Kindred Nursing Centers Ltd. P'ship v. Clark might change this, but it does not appear, at least not yet, that it has. In a recent case, Defina v. Go Ahead and Jump 1, LLC d/b/a Sky Zone Indoor Trampoline Park, the Appellate Division was asked to revisit, in light of Kindred Nursing, its prior decision refusing to enforce an arbitration provision in a contract between a trampoline park and one of its customers. The Appellate Division did so, but affirmed its prior decision, holding that Kindred Nursing did not require New Jersey courts to change the manner in which they approach arbitration provisions.

I wrote about Defina in its first go-around with the Appellate Division -- Bounce Around The (Court)Room: Trampoline Park's Arbitration Provision Deemed Unenforceable. The underlying facts of the case are unfortunate. A child fractured his ankle while playing "Ultimate Dodgeball" at a trampoline park. Before entering the facility, the child's father signed a document entitled, "Participation Agreement, Release and Assumption of Risk." The document contained an arbitration provision, which provided: 

If there are any disputes regarding this agreement, I on behalf of myself and/or my child(ren) hereby waive any right I and/or my child(ren) may have to a trial and agree that such dispute shall be brought within one year of the date of this Agreement and will be determined by binding arbitration before one arbitrator to be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. I further agree that the arbitration will take place solely in the state of Texas and that the substantive law of Texas shall apply.

Notwithstanding this provision, the child's parents sued the trampoline park in state court, alleging tort claims for simple negligence and gross negligence, and statutory claims for alleged violations of the Consumer Fraud Act and the Truth in Consumer Contract, Warranty and Notice Act. 

NJ Supreme Court Narrowly Defines "Aggrieved Consumer." End Of The Road For One Type Of "No Injury" Class Action?

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

I have written a number of times about New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). (Here, here, and here for example.) This statute, which was largely ignored after it was enacted in 1981, became increasingly popular in recent years as part of so-called no injury class actions. (So-called mostly by defense counsel, not plaintiff's counsel.) Its popularity may now have come to an end, however, because the New Jersey Supreme Court recently issued its opinion in the highly-anticipated case, Spade v. Select Comfort Corp., which answered two questions certified to it by the U.S. Circuit Court of Appeals for the Third Circuit, one of which appears to hamper, at the very least, the ability of plaintiffs to sue for alleged violations of the act.

By way of brief background, the TCCWNA was enacted to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. It provides:

No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written  consumer contract  .  .  .  or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.

To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract containing a provision that violated a legal right of the consumer or a responsibility of the seller; and (4) that it was an "aggrieved consumer." Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, and reasonable attorneys' fees and court costs.

The questions certified to the Supreme Court in Spade arose out of two cases that had been consolidated by the district court. Each involved plaintiffs who ordered furniture pursuant to contracts that violated certain regulations promulgated by New Jersey's Division of Consumer Affairs. The regulations require, among other things, that furniture sellers deliver furniture to customers by or before the promised delivery date or provide written notice that they will not be able to do so. Sellers must also provide notice to the purchaser that if the delivery is late, the consumer has the option of canceling the order and receiving a full refund, or agreeing to accept delivery at a specified later date. The regulations also prohibit sellers from including certain language in their contracts, such as "all sales final," "no cancellations," and "no refunds." In Spade, plaintiffs alleged that the contracts they entered into with defendants did not contain language required by these regulations, contained language prohibited by these regulations, or both. Notably, however, plaintiffs received their furniture deliveries on time.  

No Expert Needed When Party's Attempt To Fix Clogged Tub "Bespeaks Negligence"

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Although I have been a homeowner for a number of years and like to think that I am reasonably handy, my knowledge of plumbing  is probably more informed by Mario Brothers than anything else. As the saying goes, I know just enough about the subject to be dangerous, so I generally try to avoid it. One of the parties in a recent Appellate Division decision, Sayat Nova, LLC v. Koestner, probably would have been better served heading this advice, as the Appellate Division held that no expert was needed to show that it acted negligently when it broke a pipe in a clogged tub that caused flooding in a restaurant several floors down.

In Sayat Nova, plaintiff operated a restaurant in defendant's building. After water from a third-floor apartment came flooding like a "waterfall" out of the ceiling and into the restaurant, plaintiff sued. The incident that precipitated the lawsuit was not the first time that the restaurant flooded. Four times in the previous three years, water entered the restaurant from the same general area in the ceiling. Each incident "involved more water and more damage than the previous incident." Each time plaintiff notified defendant, but never received a response. On one prior occasion, after receiving no response from defendant, plaintiff hired contractors at his own expense to repair the damage. Plaintiff was never compensated for these expenses or any losses caused by the prior incidents. 

In the incident that led to the complaint, water came into plaintiff's restaurant from the ceiling above a different area of the restaurant than in prior incidents. Moments after plaintiff noticed the intrusion, the building's superintendent entered the restaurant with a man plaintiff did not know. Neither man was a licensed plumber. The superintendent told plaintiff: "By mistake we broke the pipe . . . We try to fix the fixture, and the guy by mistake break the pipe." He was apparently referring to a pipe in a third-floor apartment with a "hair-clogged tub." After the incident, defendant called a licensed plumber to fix the problem, but the damage caused plaintiff to have to close his restaurant several days for repairs.

In Lawsuit Over Allegedly Defective Baccarat Cards, Casino's Damages Capped At Little More Than One Green Chip

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

The running battle between the Borgata and world renowned poker player Phil Ivey (among others) continues, and, fortunately, continues to be interesting. As I wrote about here and here, the Borgata sued Ivey and an associate, Cheng Yin Sun, after the two men won more than $9.6 million playing Baccarat at the casino. The Borgata claimed that the two men used an impermissible "edge sorting" scheme  to win the money, and therefore breached their implicit contract with the casino to abide by the terms of the Casino Control Act. The scheme relied, in part on an alleged defect in the playing cards, which Ivey and Sun knew about and exploited. The Third Circuit described it as follows:

The scheme is called "edge sorting," where Sun would identify minute asymmetries on the repeating diamond pattern on the backs of the playing cards to identify certain cards' values, and would have the dealer turn those strategically important cards so that they could be distinguished from all other cards in the deck. Ivey and Sun would then be able to see the leading edge of the first card in the shoe before it was dealt, giving them 'first card knowledge,' and Ivey would bet accordingly.

The Borgata successfully moved for summary judgment against Ivey and Sun, and was awarded more than $10 million in damages.

In addition to suing the players, the casino also sued the manufacturer of the cards that were used in the edge-sorting scheme. Both moved for summary judgment, and both motions were initially denied without prejudice. After the district court's decision on the casino's summary judgment motion against Ivey and Sun, both renewed their motions. The district court again denied both, but in doing so, threw cold water on the casino's claims against the manufacturer, including holding that the most the casino could recover against the manufacturer was $26.88, the cost of the allegedly defective cards.

You Can't Be Compelled To Arbitrate In A Nonexistent Forum

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

This one may seem obvious, but, in MacDonald v. Cashcall, Inc., the U.S. Court of Appeals for the Third Circuit held that a contractual arbitration provision that calls for arbitration in an "illusory forum" is not enforceable. So, if you were thinking about trying to compel arbitration in Wakanda or before the Jedi Council, better think twice.

In MacDonald, plaintiff entered into a loan agreement with a entity known as Western Sky in connection with a $5,000 loan. The loan agreement stated that it was "subject solely to the jurisdiction of the Cheyenne River Sioux Tribe," and "governed by the . . . laws of the Cheyenne River Sioux Tribe." It also contained an arbitration provision requiring that any disputes arising out of the agreement be "conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of [the agreement]." But the agreement also provided that either party, after demanding arbitration, could select an arbitrator from the American Arbitration Association ("AAA") or Judicial Arbitration and Mediation Services ("JAMS") to administer the arbitration, and, if it did, "the arbitration [would] be governed by the chosen arbitration organization's rules and procedures" to the extent that they did not contradict the "law of the Cheyenne River Sioux Tribe." The agreement also contained a severability clause, providing that, if any provision of the agreement was deemed invalid, the remaining provisions would remain in effect.

Although plaintiff originally borrowed $5,000, "[h]e was charged a $75 origination fee and a 116.73% annual interest rate over the seven-year term of the loan, resulting in a $35,994.28 finance charge." After paying approximately $15,493 on the loan, which included $38.50 in principal, $15,256.65 in interest, and $197.85 in fees, plaintiff filed a putative class action lawsuit against defendants, asserting federal RICO claims and state law claims for usury and consumer fraud. Defendants moved to compel arbitration. The district court denied the motion, holding that the loan agreement's "express disavowal of federal and state law rendered the arbitration agreement invalid as an unenforceable prospective waiver of statutory rights." Defendants appealed. 

Federal Reserve Approves Colorado Credit Union To Serve Cannabis Industy (But There's A Catch)

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

The Wall Street Journal recently reported that the Federal Reserve conditionally approved a Colorado credit union, Fourth Corner Credit Union, to serve cannabis-linked businesses. To obtain this approval, however, the credit union had to “step back from its original plan to serve state-licensed dispensaries.” Instead, it will focus on “individuals and companies that support legalized marijuana, including those who partner with vendors, such as accountants and landlords.” In other words, the credit union can service individuals and entities involved in the cannabis industry, but not those who “touch the plant.”

 Read the full article here.

Virginia Approves Expanded Use Of Cannabis Extracts For Medicinal Purposes

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Both houses of Virginia’s legislature have unanimously approved bills that will expand the ability of Virginia doctors to recommend marijuana or cannabis extracts to their patients. The bills are not identical, but once the relatively minor differences between them are reconciled, a consolidated bill will be sent to Governor Terry McAuliffe for his signature.

Click here to read more.

Appellate Division Quotes Lucinda Williams, Orders Trial Court To Take Closer Look At Whether Debt Was Fully Satisfied

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Add this to the list of things you never want to hear a court say about your performance during a case: "defendants' presentation of evidence certainly gave voice to the song lyric, 'when nothing makes any sense, you have a reason to cry.'" (It is a lyric from a Lucinda Williams song if you were curious.) But this was the Appellate Division's conclusion in Brunswick Bank & Trust v. Heln Management, LLC, a case that was making its second appearance before the Appellate Division (after an earlier remand) and was sent back to the trial court for a third round.

The issue in Brunswick Bank was relatively straightforward. Plaintiff and defendants entered into five loans. The loans were secured by mortgages on several properties owned by defendants. After defendants defaulted on the loans, plaintiff sued and obtained a judgment against defendants. Plaintiff then filed foreclosure actions against defendants, seeking to foreclose on the mortgages it held against defendants' properties. It received final judgments of foreclosure in these cases as well. Some of these properties were then sold, which "provided rolling compensation for [plaintiff] against all defendants' obligations."

At some point during this "rolling" sale of mortgaged properties, defendants moved to stay all pending foreclosure proceedings, arguing that plaintiff was "over-capitalized" - i.e., it was going to collect more than it was entitled to collect under its judgment. Defendants then moved to have the judgment deemed satisfied, arguing that plaintiff had already recovered -- through its collection efforts -- the full amount of the judgment. The trial court granted the motion but held that two pending foreclosures could proceed. The trial court further acknowledged that it had the power to "prevent a windfall" to plaintiff, but that the record was "too muddled" to decide whether this was the case. 

'Til Death, Not Bank Levy, Do You Part: Creditor Must Prove Funds In Joint Account Belong To Debtor, Not Wife

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

A wise colleague once told me that obtaining a judgment only gets you about 60% of the way home. Collecting on judgments is a sometimes overlooked, but almost always tedious and expensive process that makes me think my colleague was optimistic with his 60% projection. The Appellate Division's decision in Banc of America Leasing and Capital, LLC v. Flethcer-Thompson Inc., offers just one example of the many nuances of collection work that make it a minefield for the unwary.

In Banc of America, plaintiff obtained a judgment against several defendants in Michigan. It domesticated the judgment in New Jersey and obtained a bank levy against a joint account held by both defendant, Kurt Baur, and his wife, who was not a party to the lawsuit. After the sheriff served the writ and froze the assets in the account, plaintiff filed a turnover motion to have the funds turned over to satisfy a portion of the judgment. Baur and his wife opposed the motion, arguing that the funds in the account were the wife's personal property and derived  from her pension, earnings, and tax refunds.

Before the trial court ruled on the motion, the parties entered into a consent order, under which defendants agreed to replace the "levied funds" with "replacement funds" in an equal amount. Once the "replacement funds" were deposited, plaintiff's counsel would release the "levied funds" back to defendants. In addition, defendants agreed to pay plaintiff $25,000 per quarter and $6,000 per month until the judgment was satisfied. Unfortunately, defendants defaulted on their obligations under the consent order, and plaintiff filed a new motion to turnover the "levied funds." Baur and his wife opposed the new motion on the same grounds as they had opposed the original motion. The trial court granted plaintiff's motion. In a three-sentence opinion, the court concluded that there was an agreement reached by the parties to avoid turnover, but defendants breached that agreement, therefore turnover was justified. Defendants appealed. 

Court Bounces Trampoline Park's Arbitration Provision

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

A few months ago, I wrote about the enforceability of an arbitration provision in a case involving a child who was injured at a trampoline park ("Bounce Around The (Court)Room: Trampoline Park's Arbitration Provision Deemed Unenforceable"). In that case, the trampoline park moved to compel arbitration, but the court denied the motion, holding that the waiver was unenforceable under the New Jersey Supreme Court's seminal decision in Atalese v. U.S. Legal Servs. Group, L.P, because there was no clear and unambiguous statement that plaintiff was waiving the right to sue in court to obtain relief. Today, the Appellate Division released its decision in Weed v. Sky NJ, LLC, which involved a similar issue at a similar trampoline park and in which, unfortunately for the trampoline park, the court arrived at the same conclusion (albeit for different reasons).

In Weed, plaintiff, a minor, went to a SkyZone trampoline park. Before being allowed to jump, her mother was required to sign a document with a title only a lawyer could love -- "Conditional Access Agreement, Pre-Injury Waiver of Liability, and Agreement to Indemnity, Waiver of Trial, and Agreement to Arbitrate" (the "Agreement") Having apparently read my blog about the enforceability of these types of agreements at trampoline parks, the Agreement explained, in some detail, that, by signing the Agreement, the participant was waiving the right to sue in court, the right to trial by jury, etc. Plaintiff's mother signed it, and plaintiff's visit to the park on this occasion was apparently uneventful.

Not so when she returned several months later. On that visit, plaintiff was accompanied by a friend and her friend's mother. Both children were again required to sign the Agreement before being allowed to jump. Plaintiff's friend's mother signed on behalf of both children. Notably, the Agreement required that an adult signing on behalf of a child had to be the child's parent or legal guardian, or had to have been granted power of attorney to sign on behalf of the child. Plaintiff's friend's mother did not meet these requirements, but nonetheless signed the Agreement and plaintiff and her friend were allowed to enter. Plaintiff was injured during this visit to the park and sued.