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Smart Summary

Factual and Procedural Background

Plaintiff B-Sharp Musical Productions, Inc. (doing business as Hank Lane Music and Productions) and defendant James Haber entered into a contract for plaintiff to provide a 16-piece band to perform at Mr. Haber's son's bar mitzvah for approximately $30,000. The contract included a liquidated damages clause specifying payment obligations if Mr. Haber cancelled the contract within certain time frames. Less than 90 days before the event, Mr. Haber notified plaintiff in writing that he was cancelling the contract. Plaintiff demanded payment of the remaining balance of approximately $25,000, which Mr. Haber refused to pay. Plaintiff then commenced this action against Mr. Haber and his wife, Jill S. Haber, seeking to enforce the liquidated damages clause.

The Civil Court of the City of New York granted plaintiff's motion for summary judgment enforcing the liquidated damages clause and denied defendants' cross motion for partial summary judgment dismissing the cause of action and the complaint against Mrs. Haber. Defendants appealed this order.

Legal Issues Presented

  1. Whether the liquidated damages clause in the musical services contract is enforceable or constitutes an unenforceable penalty.
  2. Whether the liquidated damages clause complies with the statutory type size requirement under CPLR 4544.
  3. Whether the complaint should be dismissed as against defendant Jill S. Haber based on lack of agency or contractual obligation.

Arguments of the Parties

Defendants' Arguments

  • The liquidated damages clause should be dismissed because it does not comply with the type size requirement of CPLR 4544.
  • The complaint should be dismissed as against Mrs. Haber, as she did not sign the contract and no agency relationship exists between her and Mr. Haber.

Plaintiff's Arguments

  • The liquidated damages clause is a valid and enforceable contractual provision, not an unenforceable penalty.
  • Mr. Haber is obligated to pay the remaining balance under the contract due to his cancellation within 90 days of the event.
  • The complaint should be maintained against Mr. Haber, and Mrs. Haber should remain a defendant unless dismissed for lack of contractual obligation.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 379 Guidance on enforceability of liquidated damages clauses and their distinction from penalties. Used to support the determination that the liquidated damages clause was enforceable under the circumstances.
Truck Rent-A-Ctr. v Puritan Farms 2nd, 41 NY2d 420 Legal standard distinguishing enforceable liquidated damages clauses from unenforceable penalties. Confirmed the clause was an enforceable liquidated damages provision rather than a penalty.
Turner-Schraeter v Brighton Travel Bur., 258 AD2d 393, 393-394 (1999) Explanation that liquidated damages clauses can reflect estimated probable losses based on timing of cancellation. Quoted to illustrate the rationale behind the contract’s liquidated damages clause related to timing of cancellation.
Tsadilas v Providian Natl. Bank, 13 AD3d 190, lv denied 5 NY3d 702 Requirement for precise proof of type size compliance under CPLR 4544. Applied to reject defendants’ claim that the clause violated the type size requirement due to insufficient evidence.
Gulf Ins. Co. v Kanen, 13 AD3d 579 Reference point for type size measurement under CPLR 4544. Used as a comparative authority in assessing defendants’ failure to prove non-compliance with type size rules.
Four Winds Hosp. v Keasbey, 92 AD2d 478, mod on other grounds 59 NY2d 943 Agency law principle that marital relationship alone does not establish agency. Supported dismissal of complaint against Mrs. Haber due to lack of agency relationship with Mr. Haber.
Kozecke v Humble Oil Ref. Co., 46 AD2d 986 Agency cannot be implied solely from marital status. Reinforced that Mrs. Haber was not liable on the contract absent evidence of agency.

Court's Reasoning and Analysis

The court analyzed the liquidated damages clause within the context of established New York law distinguishing enforceable liquidated damages from penalties. It found that the clause reasonably estimated plaintiff's probable loss based on the timing of cancellation, consistent with precedent (e.g., Turner-Schraeter). The court rejected defendants' challenge to the clause's compliance with CPLR 4544 type size requirements because defendants failed to demonstrate that the reproduced contract copy accurately reflected the original type size, a necessary element to raise a triable issue.

Regarding Mrs. Haber, the court concluded that she was properly dismissed from the complaint because she did not sign the contract and no evidence showed that Mr. Haber acted as her agent. The court emphasized that a marital relationship does not imply agency, citing relevant case law.

Holding and Implications

The court modified the Civil Court order to dismiss the complaint as against defendant Jill S. Haber and, as so modified, affirmed the order granting plaintiff summary judgment to enforce the liquidated damages clause against Mr. Haber, without costs.

The direct effect is that Mr. Haber remains liable under the contract’s liquidated damages clause for cancellation within 90 days, while Mrs. Haber is dismissed from the action. The decision does not establish new precedent but applies established principles to the facts of this case.

B-SHARP MUSICAL PRODUCTIONS, INC., Doing Business as HANK LANE MUSIC AND PRODUCTIONS, Respondent, v. JAMES HABER et al., Appellants.

OPINION OF THE COURT

Per Curiam.

Order, dated July 16, 2009, modified to grant that branch of defendants' cross motion seeking dismissal of the complaint as against defendant Jill S. Haber, and as so modified, affirmed, without costs.

Plaintiff and defendant James Haber entered into a contract pursuant to which plaintiff agreed to provide a designated 16-piece band on a specified date to perform at Mr. Haber's son's bar mitzvah. Mr. Haber was to pay approximately $30,000 for the band's services. The contract contained a liquidated damages clause stating, in pertinent part,

"If [the contract] is terminated in writing by [Mr. Haber] for any reason within ninety (90) days prior to the engagement, the remaining balance of the contract will be immediately due and payable. If [the contract] is terminated in writing by [Mr. Haber] for any reason before the ninety (90) days period, 50% of the balance will be immediately due and payable."

Less than 90 days prior to the date of the bar mitzvah, Mr. Haber sent a letter to plaintiff notifying it that he was cancelling the contract. After Mr. Haber refused plaintiff's demand that he pay the remaining amount due under the contract — approximately $25,000 — plaintiff commenced this action against Mr. Haber and his wife, defendant Jill Haber. Civil Court granted plaintiff's motion for summary judgment on its cause of action to enforce the liquidated damages clause and denied defendants' cross motion for partial summary judgment dismissing that cause of action and the complaint as against Mrs. Haber.

Given the nature of the contract and the particular circumstances underlying this case ( see JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 379), Civil Court correctly determined that the subject provision of the contract is an enforceable liquidated damages clause, not an unenforceable penalty ( see Truck Rent-A-Ctr. v Puritan Farms 2nd, 41 NY2d 420).

"The clause, which in effect uses an estimate of [plaintiff's] chances of re-booking the [band] as the measure of [its] probable loss in the event of a cancellation, reflects an understanding that although the expense and possibility of re-booking a canceled [performance] could not be ascertained with certainty, as a practical matter the expense would become greater, and the possibility would become less, the closer to the [performance] the cancellation was made, until a point was reached, [90] days before [the performance], that any effort to re-book could not be reasonably expected" ( Turner-Schraeter v Brighton Travel Bur., 258 AD2d 393, 393-394 [1999]).

Defendants' argument that the cause of action to enforce the liquidated damages clause must be dismissed because the clause does not comply with the type size requirement of CPLR 4544 is without merit. In an effort to demonstrate that the clause did not comply with the statutory type size requirement, defendants submitted a copy of the contract with the image of a ruler imprinted in the margin. However, defendants failed to establish that the type size of the copy they submitted is identical to that of the original contract, a critical failure given the precision with which type size must be measured and calculated (see CPLR 105 [t]). Therefore, defendants failed to raise a triable issue as to whether the clause violated the statutory type size requirement ( see Tsadilas v Providian Natl. Bank, 13 AD3d 190, lv denied 5 NY3d 702; cf. Gulf Ins. Co. v Kanen, 13 AD3d 579).

We agree with defendants that the complaint should be dismissed as against Mrs. Haber. The contract was signed only by Mr. Haber, and no triable issue exists as to whether Mr. Haber executed the contract as Mrs. Haber's agent. We note in this connection that an agency relationship may not be implied or inferred solely by reason of the marital relationship of the couple ( see Four Winds Hosp. v Keasbey, 92 AD2d 478, mod on other grounds 59 NY2d 943; Kozecke v Humble Oil Ref. Co., 46 AD2d 986).

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B-SHARP MUSICAL PRODS., INC. v. HABER
(Feb 19, 2010)