Opinion
17134 Index No. 657346/20 Case No. 2022–00865
01-19-2023
HOV SERVICES, INC., Plaintiff–Respondent–Appellant, v. ASG TECHNOLOGIES GROUP, INC., Defendant–Appellant–Respondent.
Chiesa Shahinian & Giantomasi PC, New York (Ronald L. Israel of counsel), and Stokes Lawrence, P.S., Seattle, WA (Shannon Jost of the Bar of the State of Washington, admitted Pro Hac Vice, of counsel), for appellant-respondent. Tarter Krinsky & Drogin, LLP, New York (Richard C. Schoenstein of counsel), for respondent-appellant.
Chiesa Shahinian & Giantomasi PC, New York (Ronald L. Israel of counsel), and Stokes Lawrence, P.S., Seattle, WA (Shannon Jost of the Bar of the State of Washington, admitted Pro Hac Vice, of counsel), for appellant-respondent.
Tarter Krinsky & Drogin, LLP, New York (Richard C. Schoenstein of counsel), for respondent-appellant.
Renwick, J.P., Webber, Moulton, Gonza´lez, Rodriguez, JJ.
Order, Supreme Court, New York County (Andrew Borrok, J.), entered January 28, 2022, which, insofar as appealed from as limited by the briefs, (a) granted defendant's motion to dismiss as to plaintiff's fraudulent inducement claim, but denied it as to plaintiff's breach of the implied covenant of good faith and fair dealing claim and affirmative defense and declaratory judgment claim; (b) granted defendant's motion for partial summary judgment as to plaintiff's fraud and waiver affirmative defenses, but denied it as to plaintiff's breach of the implied covenant of good faith and fair dealing claim and affirmative defense, declaratory judgment claim and duress affirmative defense, and estoppel affirmative defense; (c) granted plaintiff's motion for partial summary judgment to the extent of limiting defendant's counterclaim for breach of the overlapping customer restriction in Exhibit D to claims arising on or after November 30, 2016; and (d) excluded the opinion of plaintiff's expert that the parties’ databases were dissimilar, unanimously modified, on the law, to grant defendant's motion for partial summary judgment as to plaintiff's breach of the implied covenant of good faith and fair dealing claim and defense, estoppel defense, and declaratory judgment claim and duress defense, and it is declared that Exhibit E is an enforceable agreement and that it was not signed by plaintiff under duress or procured by defendant through fraud, and otherwise affirmed, without costs.
This dispute arises out of plaintiff's licensing of defendant's software pursuant to a 2005 software license agreement, as amended by Exhibit D, which extended the term of the license from September 30, 2015 through September 29, 2018, and Exhibit E, which extended the term of the license from September 30, 2018 through September 29, 2023. Plaintiff's economic duress-based declaratory judgment claim and defense to enforcement of Exhibit E should be dismissed. Defendant had no duty to extend the term of or renew plaintiff's license on any particular terms and was well within its rights to allow the license to expire pursuant to the terms of Exhibit D (see 805 Third Ave. Co. v. M.W. Realty Assoc., 58 N.Y.2d 447, 453, 461 N.Y.S.2d 778, 448 N.E.2d 445 [1983] ; 767 Third Ave. LLC v. ORIX Capital Mkts., LLC, 26 A.D.3d 216, 218, 812 N.Y.S.2d 8 [1st Dept. 2006], lv denied 8 N.Y.3d 803, 830 N.Y.S.2d 699, 862 N.E.2d 791 [2007] ). In addition, the pressure experienced by plaintiff to renew the license so as to not lose access to customer data was partly of its own making insofar as it failed to take steps earlier to negotiate license renewal or make alternate arrangements, despite its awareness of the scheduled license expiration (see Philips S. Beach, LLC v. ZC Specialty Ins. Co., 55 A.D.3d 493, 493, 867 N.Y.S.2d 386 [1st Dept. 2008], lv denied 12 N.Y.3d 713, 2009 WL 1586786 [2009] ; Pilgrim Homes & Garages v. Fiore, 75 A.D.2d 846, 848, 427 N.Y.S.2d 851 [2d Dept. 1980], lv dismissed 51 N.Y.2d 702, 431 N.Y.S.2d 1030, 410 N.E.2d 1237 [1980] ). Plaintiff's claim that defendant refused to correct a premature license expiration until Exhibit E was executed is not supported by the record.
Plaintiff's breach of the implied covenant of good faith and fair dealing claim and defense to enforcement of Exhibit E should also be dismissed on the merits. As explained above, plaintiff had no contractual right to use defendant's software after its license expired and defendant had no duty to extend or renew the license on any particular terms. "No obligation can be implied ... which would be inconsistent with other terms of the contractual relationship" ( Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 304, 461 N.Y.S.2d 232, 448 N.E.2d 86 [1983] ; see also Fiore Fin. Corp. v. Gaea N. Am., LLC, 179 A.D.3d 621, 621–622, 114 N.Y.S.3d 878 [1st Dept. 2020] ; 87 Mezz Member LLC v. German Am. Capital Corp., 162 A.D.3d 524, 525, 81 N.Y.S.3d 1 [1st Dept. 2018] ).
Plaintiff's fraudulent inducement claim and fraud defense to enforcement of the overlapping customer restrictions were properly dismissed. Although issues of fact exist regarding defendant's knowledge of the existence of overlapping customers, plaintiff's claim must nonetheless fail because it is premised on an alleged omission and the parties were not in a fiduciary relationship (see Cobalt Partners, L.P. v. GSC Capital Corp., 97 A.D.3d 35, 42, 944 N.Y.S.2d 30 [1st Dept. 2012] ). It is also clear that defendant did not have any contractual duty to provide a customer list. Plaintiff's reliance on the "special facts" doctrine is misplaced because plaintiff was equally capable of discovering the existence of overlapping customers (see Silver Point Capital Fund, L.P. v. Riviera Resources, Inc., 198 A.D.3d 432, 433, 155 N.Y.S.3d 155 [1st Dept. 2021] ; see also generally Jana L. v. W. 129th St. Realty Corp., 22 A.D.3d 274, 277–278, 802 N.Y.S.2d 132 [1st Dept. 2005] ).
Plaintiff's waiver defense to enforcement of the overlapping customer restrictions was also properly dismissed as foreclosed by the license agreement's no-waiver and no-oral-modification provisions (see Plotch v. 375 Riverside Dr. Owners, Inc., 92 A.D.3d 478, 478, 938 N.Y.S.2d 524 [1st Dept. 2012] ). Although such provisions may themselves be waived, here, there was no clear manifestation of intent to do so and no more than a "passive acceptance" of benefits (see BDCM Opportunity Fund II, LP v. Yucaipa Am. Alliance Fund I, LP, 112 A.D.3d 509, 511, 978 N.Y.S.2d 10 [1st Dept. 2013], lv denied 22 N.Y.3d 1171, 985 N.Y.S.2d 472, 8 N.E.3d 849 [2014] ; see also generally Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., L.P., 7 N.Y.3d 96, 101, 104–106, 817 N.Y.S.2d 606, 850 N.E.2d 653 [2006] ; Aiello v. Burns Intl. Sec. Servs. Corp., 110 A.D.3d 234, 245, 973 N.Y.S.2d 88 [1st Dept. 2013] ).
Plaintiff's estoppel defense should also be dismissed with respect to both Exhibits D and E for the same reason as the fraud defense – i.e., the absence of any duty to disclose (see Fisher Bros. Sales, Inc. v. United Trading Co. Desarrollo y Comercio, 191 A.D.2d 310, 311–312, 595 N.Y.S.2d 175 [1st Dept. 1993] ; K. Bell & Assoc., Inc. v. Lloyd's Underwriters, 1997 U.S. Dist LEXIS 2417 *20, 1997 WL 96551, *7 [S.D. N.Y. Mar. 5, 1997, No. 92 Civ 5249(AJP)(KTD)], affd 1997 U.S. App LEXIS 31872, 1997 WL 701387 [2d Cir. Nov. 10, 1997, No. 97–7397] ).
The motion court appropriately limited defendant's counterclaim for breach of the overlapping customer restriction to conduct arising within the two years preceding defendant's assertion of the same counterclaim in a prior federal action. Although this claim was subject to a two-year contractual limitation provision, the overlapping customer restriction constituted a continuing duty, which was breached anew at least each time a new contract was entered into, even if with the same overlapping customer (see CWCapital Cobalt VR Ltd. v. CWCapital Invs. LLC, 195 A.D.3d 12, 17–20, 145 N.Y.S.3d 61 [1st Dept. 2021] ; Ganzi v. Ganzi, 183 A.D.3d 433, 434–435, 123 N.Y.S.3d 574 [1st Dept. 2020] ; Matter of Yin Shin Leung Charitable Found. v. Seng, 177 A.D.3d 463, 464, 113 N.Y.S.3d 46 [1st Dept. 2019] ).
The opinion of plaintiff's expert that the parties’ databases were dissimilar was properly excluded based on the admissions of plaintiff and its expert that the expert's analysis did not require any technical expertise (see De Long v. County of Erie, 60 N.Y.2d 296, 307, 469 N.Y.S.2d 611, 457 N.E.2d 717 [1983] ; GMAC Commercial Credit v. Mitchell–B.J., Ltd., 272 A.D.2d 51, 51, 707 N.Y.S.2d 315 [1st Dept. 2000] ). The fact that the request to exclude was first made in defendant's opposition papers is not a bar to its consideration (see Wimbledon Fin. Master Fund, Ltd. v. Laslop, 169 A.D.3d 550, 551, 95 N.Y.S.3d 152 [1st Dept. 2019] ) – especially in view of plaintiff's opportunity to respond and failure to raise this objection below. Plaintiff's argument that its expert should nonetheless be allowed to offer the disputed testimony as a fact witness is unavailing, as lay witnesses are not ordinarily permitted to offer opinion testimony, and this is not a case where it is "impossible to accurately describe the facts without stating an opinion or impression" ( People v. Hackett, 228 A.D.2d 377, 378, 646 N.Y.S.2d 89 [1st Dept. 1996], lv denied 88 N.Y.2d 986, 649 N.Y.S.2d 392, 393, 672 N.E.2d 618, 619 [1996]), or where the testimony was otherwise necessary "to aid the jury in making an independent assessment" ( People v. Russell, 79 N.Y.2d 1024, 1025, 584 N.Y.S.2d 428, 594 N.E.2d 922 [1992] ).
In view of our disposition of these issues, we need not reach the parties’ arguments with respect to the timeliness of plaintiff's fraudulent inducement and declaratory judgment claims.