’Gross Negligence’ Revisited

New York Real Estate Journal recently published an article written by Olshan Real Estate Partner Thomas Kearns entitled “’Gross Negligence’ Revisited.“ “Under New York law,” he explains, “gross negligence is defined as conduct that ‘evinces a reckless disregard for the rights of others or “smacks” of intentional wrongdoing’ or where a party ‘fails to exercise even slight care.’” He adds that “a key consideration for a business person who is a party to an indemnification agreement is to avoid a fact trial due to the expense and unpredictability of the outcome–the much preferred method is to defeat the claim as a matter of law meaning a judge can decide the matter on motion papers.” To illustrate this point, Mr. Kearns cites S.A. DE OBRAS Y SERVICIOS, COPASA v. The BANK OF NOVA SCOTIA, a 2019 case in which the Appellate Division’s First Department addressed an error made by the bank in its role as financial advisor to the plaintiff. The court ultimately ruled that whether the mistake constituted gross negligence was for a jury to decide. “Lesson learned,” Mr. Kearns concludes. “Some innocent mistakes can be so egregious and the results so catastrophic that a court will hold that a jury or other fact finder must hear evidence of all the circumstances to determine whether the erring party was grossly negligent. That’s an expensive and dangerous place to be.”