Padilla v. An Concludes Duty Should be Imposed on Vacant Lot Owners to Maintain Reasonable Sidewalks

Plaintiff, Alejandra Padilla, allegedly tripped and fell while walking on the public sidewalk abutting a vacant commercial lot owned by Defendants, Young Il An and Myo Soon An. Plaintiff claimed that the Defendants were negligent for failing to reasonably maintain the sidewalk. Defendants moved for summary judgment, arguing they did not owe Plaintiff a duty of care. The trial court granted Defendants’ motion and the Appellate Division affirmed.

On appeal, the New Jersey Supreme Court was asked to determine whether owners of vacant commercial lots have a common law duty to maintain the public sidewalks abutting those lots in reasonably good condition. The Court began its analysis by noting that whether a duty exists is ultimately a question of fairness. According to the Court, there is something “profoundly unfair” about commercial property owners purchasing vacant lots and having no responsibility whatsoever for maintaining the area where the general public traverses.

Furthermore, the New Jersey Supreme Court pointed out the difficulty of employing a case-by-case, commercial property-by-commercial property approach to determining when a duty is owed. Specifically, Defendants’ suggestion to base liability on profitability or a path to profitability to be an unworkable approach that will lead to inconsistent results and unfairly harm the public. Conversely, a bright-line rule that commercial property owners owe a duty is the most workable rule to protect the general public and to ensure consistency in commercial sidewalk liability law.

Ultimately, the New Jersey Supreme Court held all commercial landowners, including owners of vacant commercial lots, have a duty to maintain the public sidewalks abutting their property in reasonably good condition and are liable to pedestrians injured as a result of their negligent failure to do so. This rule “will clarify the scope of commercial sidewalk liability and provide clear guidance to courts, commercial property owners, and the public.”  Undoubtedly, this ruling will affect how litigants address cases with vacant commercial lots.

The Corporate Transparency Act Found Unconstitutional Only Two Years After Its Passing

In order to reveal or “crack down” anonymous shell companies Congress passed the Corporate Transparency Act. The Act became effective on January 1, 2021, due to Congress’ override. This act requires certain business entities (“reporting companies”) to file, in the absence of an exemption, information on their beneficial owners with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. FinCen is authorized to disclose information: to U.S. federal law enforcement agencies, with court approval to certain other enforcement agencies, to non-US law enforcement agencies, prosecutors or judges based upon a request of a U.S., federal law enforcement agency, and with consent of the reporting company, to financial institutions and their regulators. This Act was to shift the collection burden from financial institutions to the reporting companies. Additionally. it was to impose stringent penalties for willful non-compliance and unauthorized disclosures. More than 32 million entities were estimated to be affected by this Act and required to file.

The filing required the business name, current address, state of information, and tax identification number for each entity. Furthermore, the filing required the name, birth date, address, and a government-issued photo ID. A driver’s license or a passport of every direct and indirect owner sufficed. Since the indirect owners were included in this Act, it created a broad range of who would qualify as an indirect owner and the requirement of their personal information. High penalties were issued to those that failed to comply.

On March 1, 2024, the Corporate Transparency Act was ruled unconstitutional in the U.S. District Court of Alabama. This act was seen as already complicated because it applied to both direct ownership and beneficial ownership. The Plaintiffs in this case were the National Small Business Association (NSBA). One concern about the CTA was that private information is required to be filed such as a driver’s license or passport, home address, and a social security number which can lead to identity theft. Second, there was a short deadline. For example, the time frame for a change including a minor who turned 18 and was an owner of shares must be reported within 30 days. Compliance with the CTA caused a burden on small businesses and large and public businesses were exempt. The high penalty fines for failure to comply included a $500 daily civil penalty, fines of up to $10,000, and a two-year prison term for those that did not submit or update ownership information with FinCen. Furthermore, if parties knowingly failed to comply, that triggered a $500 per day civil penalty, $250,000 in fines, and a five-year federal prison sentence.

The recent ruling only affects the CTA compliance and filing requirements for NSBA members. The CTA still requires that law firms and other professionals that form business entities to file under the CTA. The severe penalties are still intact and business entities should analyze the law and comply with its requirements.

NY Appellate Division Finds No Duty to the Public for Event Sponsor

In a recent ruling from the New York Appellate Division’s Second Judicial Department, the Court affirmed a Kings County Supreme Court decision to dismiss the plaintiff’s Complaint against an event sponsor in a trip-and-fall case, finding that merely sponsoring an event did not create a duty to the public without control of the involved premises.

In Paden v. Brooklyn Museum of Arts, et al., plaintiff Francisca Paden was allegedly injured when she tripped over a sign on the sidewalk outside of the Brooklyn Museum of Art. The sign was advertising the “2018 CFDA Fashion Awards in partnership with Swarovski,” an event being hosted by the defendant museum and sponsored by Swarovski, a well-known jewelry retailer. The plaintiff filed suit to recover damages for personal injuries, naming as defendants the Brooklyn Museum of Art and Swarovski North America, Ltd., Swarovski Retail Ventures, Ltd., and Swarovski Digital Business USA Inc. Swarovski then moved to dismiss the Complaint, for failure to state a cause of action against them. The trial court granted their motion on the basis that there was no evidence that Swarovski owned, occupied, controlled, or used the property adjacent to where the incident occurred. The plaintiff then appealed the Decision.

The main issue in front of the Appellate Division was whether Swarovski owed a duty of care to the plaintiff. The Court, citing Smith v. Dutchess Motor Lodge, noted in their opinion that in order to establish common-law negligence, a plaintiff must demonstrate (1) a duty owed by the defendant to the plaintiff, (2) a breach of that duty, and (3) that the breach constituted a proximate cause of the injury. Further, in citing Torres v. City of New York, the Court went on to note that “liability for a dangerous or defective condition on property is predicated upon ownership, occupancy, control or special use of the property.”

In this case, the plaintiff was unable to prove that Swarovski had any responsibility for the location and maintenance of the sign, and was unable to demonstrate that Swarovski owned, occupied, controlled, or made special use of the property adjacent to the sidewalk where the plaintiff had tripped. As such, the Court held that the plaintiff did not sufficiently plead that Swarovski owed her a duty of care, and upheld the Supreme Court’s ruling to dismiss the plaintiff’s Complaint against Swarovski.

This ruling demonstrates that although the sign on the sidewalk was advertising a Swarovski-sponsored event, since the sign was located on property that was not owned, occupied, controlled, or made special use of by Swarovski, they had no responsibility for the location of the sign, and thus, did not owe any duty to the plaintiff. This ruling establishes an important precedent by shielding defendants against actions in which they lack ownership or control of a situation, and emphasizes the principle that a party’s legal duty or responsibility must be proportionate to their ability to affect the circumstances.

Court of Appeals Expands the Scope of the Industrial Code as Applied to Slipping Hazards

We recently litigated in the New York Court of Appeals in the matter.  Plaintiff was a painter and was allegedly injured while painting around an escalator.  Heavy-duty plastic sheeting had been placed on the steps of the escalator to protect it from paint.  Plaintiff allegedly slipped on the plastic sheeting and he pursued various Labor Law causes of action against the contractors and owner.

The parties filed summary judgment and the Supreme Court granted Plaintiff’s § 241(6) motion based on violations of two Industrial Code regulations: (1) Section 23-1.7(d) which states (“[e]mployers shall not suffer or permit any employee to use a floor, passageway, walkway, scaffold, platform or other elevated working surface which is in a slippery condition. Ice, snow, water, grease and any other foreign substance which may cause slippery footing shall be removed, sanded or covered to provide safe footing”); and (2) Section 23-1.7(e)(1), which states, (“[a]ll passageways shall be kept free from accumulations of dirt and debris and from any other obstructions or conditions which could cause tripping.”)

The Appellate Division, First Department reversed and found that Plaintiff could not recover under Industrial Code § 23-1.7(d), prohibiting slipping hazards, because the plastic sheeting “does not constitute a foreign substance under the regulation.... Sensibly interpreted, the heavy-duty plastic covering is not similar in nature to the foreign substances listed in the regulation, i.e., ice, snow, water or grease.... Further, it is not disputed that the covering was intentionally placed on the escalator to protect it from paint. In other words, the covering was part of the staging conditions of the area plaintiff was tasked with painting, making it integral to his work.”  The First Department found the defendants were not liable for a tripping hazard under section 23-1.7(e)(1) for the same reason, “namely that the plastic covering was an integral part of the work being performed,” and also because “the escalator was not serving as a ‘passageway’ but rather was a work area.”

The Court of Appeals reversed the First Department and found that Plaintiff satisfied the “textual” requirements of 23-1.7 (d): the escalator is clearly the type of work surface enumerated.  Plaintiff also established that the plastic covering was not part of the escalator and this foreign substance created a slippery condition.  The Court observed that the Appellate Division erred because the plastic covering was not a component of the escalator and was not necessary to the escalator’s functionality.  Therefore, it was, by definition a substance foreign to the escalator.   Thus, the use of some cover was integral to Plaintiffs’ assignment to paint around the escalator but that does not mean that any cover used—even one that was inherently slippery—was necessarily “integral,” particularly where a safer alternative would have accomplished the same goal.

This opinion signals that New York Courts will read the Industrial Code broadly at least as it pertains to “foreign substances” beyond “ice, snow, water or grease.”  This decision also hints that courts may review whether a safer alternative would have accomplished the same goal at a construction site.

Pennsylvania Superior Court Ruling in Watson v. Baby Trend, Inc. Opens an Avenue for Certain Businesses to Challenge Venue

Appellants’ infant daughter died of asphyxiation while sleeping in a car seat manufactured by Baby Trend, Inc. Appellants reside in Bucks County and the cause of action arose there. Baby Trend is a California-based corporation with no registered offices in Pennsylvania.

On October 12, 2021, Appellants filed an Amended Complaint in the Philadelphia Court of Common Pleas asserting products liability/strict liability, negligence and breach of warranty claims against Baby Trend. Subsequently, Baby Trend filed preliminary objections on the basis of improper venue. On August 3, 2022, the trial court sustained Baby Trend’s preliminary objections and transferred this matter to Bucks County.

On appeal to the Pennsylvania Superior Court, Appellants argue that the trial court abused its discretion when it concluded that Baby Trend does not regularly conduct business in Philadelphia County. In particular, Appellants argue that Baby Trend’s sales to big-box retailers in Philadelphia County and direct to Philadelphia County consumers through Baby Trend’s website satisfy the “quality” prong of the venue test because those sales are not “merely incidental.”

On January 12, 2024, the Pennsylvania Superior Court affirmed the trial court’s decision to transfer this case to Bucks County. As to the “quality” of Baby Trend’s contacts, the evidence of record confirms the trial court’s finding that Baby Trend’s direct website sales to consumers in Philadelphia County, comprising less than one percent of its total sales, is de minimis and purely incidental. Those sales are not essential to Baby Trend’s business objective of serving as a wholesaler of juvenile items to retail chains.

Additionally, Pennsylvania Superior Court held that the trial court correctly refused to impute the business activities of a separate and distinct business onto the business activities of Baby Trend. Once Baby Trend sells its products to big-box retailers, it has no control over where the retailers sell the products. Thus, it is the big-box retailer, and not Baby Trend, who is engaged in the act of selling the product to customers.

As to the “quantity” prong of the “regularly-conducts-business analysis,” the Pennsylvania Superior Court identified Baby Trend’s lack of business activity in Philadelphia in the following areas: 1) does not own any real estate in Philadelphia; 2) does not maintain any place of business in Philadelphia; 3) does not employ any sales representative in Philadelphia; and 4) is not registered as a foreign corporation for the purposes of doing business in Philadelphia. In conclusion, given the complete absence of any physical presence in Philadelphia through which Baby Trend conducts business activity essential to its business objective, there is no evidence demonstrating that Baby Trend's contacts with Philadelphia County are continuous, habitual, or regular. 

Validity of Joint Proposal for Settlement in Florida: Analysis of SDG Dadeland Associates, Inc. v. Arias

The Third District Court of Appeal for Florida in SDG Dadeland Associates, Inc., v. Keyna Arias, reversed the Circuit Court of the Eleventh Circuit's denial of Defendant's motion for attorney's fees based on a joint proposal for settlement under section 768.89 of the Florida Statutes. The Third District Court held that the Joint Proposal for Settlement was valid as it accurately reflected the joint offer and allocation of payments, despite the indemnified offeror not monetarily contributing to the joint Proposal.

The Plaintiff, Kenya Arias, slipped and fell in a mall operated by Defendant, Dadeland Associates, Inc. (“Dadeland”), and maintained by Co-Defendant, Nationwide Janitorial Services, Inc. (“Nationwide”) (collectively “Defendants”). Nationwide’s service contract with Dadeland contained an indemnification provision agreeing to defend, indemnify, and hold Dadeland harmless from third-party claims resulting from Nationwide’s Janitorial services. Defendants filed a Joint Proposal for Settlement. The Joint Proposal for Settlement noted that Nationwide would contribute $5,000, while Dadeland would contribute $0.00. The Proposal for Settlement was rejected by the Plaintiff.

After a jury trial resulted in a verdict in favor of the Defendants, they moved for attorney's fees under section 768.79. The trial court denied the motion, finding that the Proposal for Settlement was invalid due to its ambiguity, particularly, Dadeland’s failure to contribute to the offer. On appeal, the Plaintiff argued that Dadeland's status as a defendant would be in question as per the terms of the Proposal for Settlement. However, the Third District Court of Appeals found this argument meritless, stating that the Proposal clearly conditioned acceptance by requiring a dismissal as to all defendants.

Secondarily, Plaintiff argued that the Joint Proposal was ambiguous as it was an illusory offer with no consideration from Dadeland. The Third District Court rejected this argument, noting out that Florida Rule of Civil Procedure 1.442 expressly allows co-defendants to make joint settlement proposals as long as the proposal states the amount and terms attributable to each party. The Court ruled that the Proposal was compliant with Florida rules and that the allocation of payments was sensible considering the indemnity agreement between the parties.

The Third DCA concluded that indemnified parties do not have to waive their entitlement to indemnification to avail themselves of the substantive rights provided under 768.79.