Category: CPLR

§ 205(a) From Up On High

CPLR § 205 Termination of action
(a) New action by plaintiff

Recently the New York Court of Appeals and 2nd Circuit Court of Appeals had occasion to discuss the recently amended CPLR § 205(a).  First, the New York Court of Appeals.  Underlying this decision is the Atlantic Yards fight that has been going on for some time.  For more on the substance of the case, and its potential impact, head over to The Legal Satyricon and Popehat.


Matter of Goldstein v New York State Urban Dev. Corp., 2009 NY Slip Op 08677 (Ct. App., 2009)

Petitioners’ initial challenge to ESDC’s determination authorizing condemnation of their properties was made in a timely federal court action. The gist of that action was that the disputed condemnation was not supported by a public use and thus violated the Fifth Amendment of the Federal Constitution…In its answer, respondent, while defending the challenged determination on the merits, sought the petition’s dismissal on the ground that it had not been timely brought.

***

While the concurrence protests that failure to bar this proceeding because it was not commenced within 30 days of subject condemnation determination will impair the Legislature’s comprehensive plan for prompt adjudication of such determinations, this overlooks that it is not in the main the availability of CPLR 205 (a) that has delayed this condemnation, but the availability of a federal forum. Petitioners had every right to litigate their federal claims in federal court and to include in their federal action a supplemental state law cause of action (28 USC § 1367 [a]; City of Chicago v International Coll. of Surgeons, 522 US 156, 169, 171 [1997]). And, even without a state tolling provision, petitioners would have had the right under federal law to recommence their unadjudicated pendant state law claim in state court at the federal action’s conclusion (28 USC § 1367 [d]). However much they may have wished to streamline the process, it was not within the power of state legislators to deprive condemnees of access to federal court to litigate federal constitutional public use issues or to limit the federal courts’ jurisdiction to adjudicate supplemental state law claims (see TBK Partners v Western Union Corp., 675 F2d 456, 460 n 3 [2d Cir 1982], citing Railway Co. v Whitton’s Administrator, 80 US [13 Wall] 270, 286 [1872]; see also Marshall v Marshall, 547 US 293, 298-299, 313 [2006]). This being the case, it is practically beside the point to cavil about the frustration of the state legislative design.

The decision from the Second Circuit discusses the old 205(a), and ultimately dismisses the lawsuit as untimely. You can find the decision over at Full Court Pass, where I found it.  I have a comment there.  With the recent amendment to § 205, and few decisions discussing the statute, these two cases provide some valuable insight.  Neither case discusses what will happen when a case is dismissed for failure to prosecute, where the court made none of the required findings.

These Are Not The Droids You’re Looking For (Discovery: CPLR § 3126)

CPLR § 3126 Penalties for refusal to comply with order or to disclose

Emmitt v City of New York, 2009 NY Slip Op 07331 (App. Div., 1st, 2009)

A party that disobeys court-ordered disclosure is subject to preclusion of relevant portions of its evidence (CPLR 3126). The nature of the sanction lies generally within the broad discretion of the court, and should not be disturbed absent an improvident exercise thereof (Gross v Edmer Sanitary Supply Co., 201 AD2d 390 [1994]). In its answer, defendant raised as an affirmative defense that any and all hazards, defects and dangers were of such an open, obvious and apparent nature that they were or should have been known to plaintiff, thus rendering her injuries attributable to her own culpable conduct. There is no reason to bar defendant from pursuing that defense. However, it was not an improvident exercise of discretion to preclude defendant from offering evidence as to the Con Edison permits. We modify only to clarify that it will be conclusively presumed at trial that defendant created or had notice of the trench involved in the accident. This relief will ameliorate the prejudice plaintiff has suffered as a result of defendant’s failure to timely disclose the Con Ed permits. Defendant’s ability to [*2]defend the suit by attributing the accident to plaintiff’s own lack of due care is not impaired.

Minaya v Duane Reade Intl., Inc., 2009 NY Slip Op 06767 (App. Div., 1st, 2009)

In sanctioning defendant for failing to preserve critical evidence, the motion court appropriately exercised its “broad discretion to provide . . . relief to the party deprived of the lost evidence” (Ortega v City of New York, 9 NY3d 69, 76 [2007]). Defendant failed to preserve a video recording that may have shown the stairway before and during plaintiff’s accident. The unavailability to plaintiff of the video recording may have impaired his ability to establish that defendant possessed the requisite notice of a defective condition on the stairs. Under these circumstances, however, the extreme sanction of preclusion is not warranted “to restore balance to the matter” (Baldwin v Gerard Ave., LLC, 58 AD3d 484 [2009]). Rather, an adverse inference is sufficient to prevent defendant from using the absence of the videotape to its own advantage (Tomasello v 64 Franklin, Inc., 45 AD3d 1287 [2007]).

Panagiotou v Samaritan Vil., Inc., 2009 NY Slip Op 07811 (App. Div., 2nd, 2009)

The plaintiffs failed to serve a responsive bill of particulars within the 30-day time limit set in the conditional order of preclusion entered February 25, 2008. The order, therefore, became absolute (see Gilmore v Garvey, 31 AD3d 381; Echevarria v Pathmark Stores, Inc., 7 AD3d 750, 751). To avoid the adverse impact of the conditional order of preclusion, the plaintiffs were required to demonstrate a reasonable excuse for their failure to comply and a meritorious cause of action (see State Farm Mut. Auto Ins. Co. v Hertz Corp., 43 AD3d 907, 908; Echevarria v Pathmark Stores, Inc., 7 AD3d at 751). The plaintiffs failed to make such a showing. Since the order of preclusion prevents the plaintiffs from establishing a prima facie case, the Supreme Court properly granted the defendants’ separate motions for summary judgment dismissing the complaint (see Calder v Cofta, 49 AD3d 484; State Farm Mut. Auto Ins. Co. v Hertz Corp., 43 AD3d at 908).

Bender, Jenson & Silverstein, LLP v Walter, 2009 NY Slip Op 08572 (App. Div., 2nd, 2009)

Since the defendant failed to establish that she made any effort to comply with the plaintiff’s repeated discovery requests, the Supreme Court properly considered her lack of cooperation to be willful and contumacious, and properly conditionally granted the plaintiff’s motion to preclude her from introducing the requested documents in evidence (see Kihl v Pfeffer, 94 NY2d 118; D’Aloisi v City of New York, 7 AD3d 750; Brooks v City of New York, 6 AD3d 565; Donovan v City of New York, 239 AD2d 461; cf. Scardino v Town of Babylon, 248 AD2d 371).

In light of the defendant’s noncompliance with discovery, the Supreme Court properly denied her motion to quash certain subpoenas which had been served on nonparty witnesses, on the basis that the information sought was otherwise unobtainable (see Hamilton v Touseull, 48 AD3d 520; Matter of Validation Review Assoc. [Berkuny Schimel], 237 AD2d 614; cf. People v Marin, 86 AD2d 40).

The bold is mine.

CPLR R. 3025 Amend and Conform–Not Too Difficult

CPLR R. 3025 Amended and supplemental pleadings
(b) Amendments and supplemental pleadings by leave

Schuyler v Perry, 2009 NY Slip Op 06825 (App. Div., 2nd, 2009)

The Supreme Court improvidently exercised its discretion in granting Perry’s motion for leave to serve an amended answer, as the first proposed amended answer was palpably insufficient and patently devoid of merit, insofar as the counterclaim contained therein was based on allegations of the plaintiff’s active or primary negligence or the plaintiff’s vicarious liability for DiMicco’s conduct, and the second proposed amended answer was palpably insufficient and patently devoid of merit, insofar as the counterclaim contained therein was based on allegations of the plaintiff’s vicarious liability for DiMicco’s conduct.

Moyse v Wagner, 2009 NY Slip Op 07808 (App. Div., 2nd, 2009)

Leave to amend a pleading “shall be freely given upon such terms as may be just” (CPLR 3025[b]; see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959) as long as the proposed amendment is not palpably insufficient or devoid of merit (see Bolanowski v Trustees of Columbia Univ. In City of N.Y., 21 AD3d 340, 341; Glaser v County of Orange, 20 AD3d 506; Ortega v Bisogno & Meyerson, 2 AD3d 607, 609). Accordingly, in considering a motion for leave to amend, it is incumbent upon the court to examine the sufficiency and merits of the proposed amendment (see Hill v 2016 Realty Assoc., 42 AD3d 432, 433; see e.g. Abrahamian v Tak Chan, 33 AD3d 947, 949; Fisher v Braun, 227 AD2d 586, 587).

Matter of Simonds v Kirkland, 2009 NY Slip Op 08662 (App. Div., 4th, 2009)

The mother also will not be heard to contend that the court erred in permitting the amendment of the pleadings to conform to the evidence presented at the hearing on the petition, inasmuch as the record establishes that the mother’s attorney consented to that amendment (see McLaughlin v City of New York, 294 AD2d 136; see also Atweh v Hashem, 284 AD2d 216, 217). In any event, “[t]he court has discretion to permit an amendment to conform the pleadings to the proof . . . [and i]t is an abuse of discretion to [withhold such permission] unless the opposing party can allege demonstrable and real surprise or prejudice” (General Elec. Co. v A. C. Towne Corp., 144 AD2d 1003, 1004, lv dismissed 73 NY2d 994; see CPLR 3025 [c]). Even assuming, arguendo, that the mother was in fact “an opposing party,” we conclude that she failed to demonstrate that she sustained any “real surprise or prejudice” arising from the amendment (General Elec. Co., 144 AD2d at 1004).

The bold is mine.


CPLR R. 3211(a)(1) Affidavits Don’t Count

CPLR R. 3211 is a curious rule.  I wrote three paragraphs, but after I read them, I realized that I was only complicating things.  Besides being a quirky rule, it is an extremely complicated rule.

Now consider Herrnsdorf v Bernard Janowitz Constr. Corp., 2009 NY Slip Op 07984 (App. Div., 2nd, 2009).

The Supreme Court properly denied that branch of Utica First’s motion which was pursuant to CPLR 3211(a)(1) to dismiss the third-party complaint. “[I]n order for a complaint to be dismissed pursuant to CPLR 3211(a)(1), the evidence submitted must resolve [ ] all factual issues as a matter of law, and conclusively dispose of the plaintiff’s claim'” (Del Pozo v Impressive Homes, Inc., 29 AD3d 621, 622, quoting Berger v Temple Beth-El of Great Neck, 303 AD2d 346, 347). Utica First failed to conclusively demonstrate that Janowitz was not an additional insured to the [*3]insurance policy. Additionally, Utica First could not rely on affidavits in support of its motion to dismiss pursuant to CPLR 3211(a)(1) because they do not constitute documentary evidence (see Berger v Temple Beth-El of Great Neck, 303 AD2d at 347).

..

A Brief CPLR R. 5015 Roundup and CPLR R. 2214(d) Appears For The First Time In this Blog.

CPLR R. 5015 Relief from judgment or order
(a) On motion
(1) excusable default…
(2) newly-discovered evidence…
(3) fraud, misrepresentation, or other misconduct of an adverse party
(4) lack of jurisdiction to render the judgment or order
(5) reversal, modification or vacatur of a prior judgment or order upon which it is based

CPLR R. 2214 Motion papers; service; time
(d) Order to show cause

MBF Leasing, LLC v Sisco, 25 Misc 3d 128(A) (App. Term, 1st, 2009)

Civil Court correctly denied, without a traverse hearing, that branch of defendant's motion seeking vacatur of the default judgment and dismissal of the complaint for lack of personal jurisdiction under CPLR 5015(a)(4) because defendant failed to sufficiently refute the factual averments contained in plaintiff's process server's affidavit of service. Defendant is nonetheless entitled to vacatur of the default judgment and an opportunity to answer the action on the merits. In light of defendant's potentially meritorious defense to the action (see Pludeman v N. Leasing Sys., 10 NY3d 486 [2008]), the absence of any discernable prejudice to plaintiff (which did not oppose defendant's motion and has not filed a respondent's brief on this appeal), defendant's showing that the default was not willful, and our preference for resolving actions on the merits, we vacate the default judgment under our "inherent discretionary power" to relieve defendant of his default "for sufficient reason and in the interests of substantial justice" (Woodson v Mendon Leasing Corp., 100 NY2d 62, 68 [2003]; see Siegel, NY Practice § 426, 725 [4th ed]).

Although the court in its discretionary power may vacate a default even though the party did not satisfy any of the conditions in CPLR R. 5015, I don't understand why the court would say that the defendant was entitled to vacatur.  Going by Webster's definition of entitle, the word hardly seems to fit.  Vacatur was a gift in this case.  Also interesting is that the defendant's motion to vacate was unopposed.  Neither was the appeal.  Unless defendant attached plaintiff's affidavit or service, how was it before the lower court?  Judicial Notice?

Speaking of weird…

Merriwether v Osborne, 2009 NY Slip Op 07602 (App. Div., 2nd, 2009)

By order dated May 22, 2007, the Supreme Court granted, apparently without opposition, the defendants' separate motions for summary judgment dismissing, inter alia, the complaint insofar as asserted against them, and a judgment dismissing the complaint was entered subsequently. Although the plaintiff was duly served with both the order and the judgment with notice of entry, he neither appealed nor moved to vacate. Nearly two years later, the Supreme Court, sua sponte, without explanation, vacated the order dated May 22, 2007, and, in effect, the judgment, and denied the defendants' motions for summary judgment.

On appeal, the defendants contend that the Supreme Court exceeded its authority in, sua [*2]sponte, vacating the order and, in effect, the judgment. We agree.

"A trial court has no revisory or appellate jurisdiction, sua sponte, to vacate its own order or judgment" (Adams v Fellingham, 52 AD3d 443, 444-445; see Armstrong Trading, Ltd. v MBM Enters., 29 AD3d 835, 836; Matter of Owens v Stuart, 292 AD2d 677, 678-679; cf. Liss V Trans Auto Sys., 68 NY2d 15, 20). Here, the court exceeded its powers by its unexplained sua sponte attempt to reconsider the summary judgment motions anew almost two years after the case was dismissed by judgment (see Matter of Owens v Stuart, 292 AD2d at 679).

WTF?

Wells Fargo Bank, N.A. v Leiba, 2009 NY Slip Op 07833 (App. Div., 2nd, 2009)

The Supreme Court properly denied the motion of the defendant Lisa Morris to vacate a judgment of foreclosure and sale dated October 27, 2005, as she failed to serve the order to show cause by which the motion was initiated in the manner specified, and within the time provided (see CPLR 2214[d]; Alden Personnel, Inc. v David, 38 AD3d 697, 698).

A bad employee can be a reasonable excuse.  See below.

Rodriguez v Rodriguez, 2009 NY Slip Op 08150 (App. Div., 1st, 2009)

Defendant's attorney's representation that a former employee had been misdirecting or misplacing mail provides a reasonable excuse for his failure to present such evidence of law office failure on defendant's original motion to vacate the default judgment as well as his failure to appear in court on various dates (see Solowij v Otis Elev. Co., 260 AD2d 226 [1999]). Defendant's affidavit shows a meritorious defense.

The bold is mine.

CPLR R. 4518 — Foundation (including “electronic records”)

CPLR R. 4518 Business records

People v Manges, 2009 NY Slip Op 08258 (App. Div., 4th, 2009)

Defendant appeals from a judgment convicting him, upon a jury verdict, of criminal possession of a forged instrument in the second degree (Penal Law § 170.25) and attempted grand larceny in the third degree (§§ 110.00, 155.35). We agree with defendant that County Court erred in admitting in evidence a printout of electronic data that was displayed on a computer screen when defendant presented a check, the allegedly forged instrument, to a bank teller. The People failed to establish that the printout falls within the business records exception to the hearsay rule (see CPLR 4518 [a]), which applies here (see CPL 60.10). The People presented no evidence that the data displayed on the computer screen, resulting in the printout, was entered in the regular course of business at the time of the transaction (see CPLR 4518 [a]). Indeed, the bank teller who identified the computer screen printout testified that "anyone [at the bank] can sit down at a computer and enter information." Because the computer screen printout was the only evidence establishing the identity of the purported true account owner upon which the check was drawn, we conclude that the evidence is legally insufficient to support the conviction (see generally People v Bleakley, 69 NY2d 490, 495). In the absence of the printout, the People failed to establish an essential element of the crime of criminal possession of a forged instrument, i.e., defendant's knowledge that the check presented to the bank teller was forged (see People v Johnson, 65 NY2d 556, 560, rearg denied 66 NY2d 759; cf. People v Shabazz, 226 AD2d 290, lv denied 88 NY2d 994) and, thus, they also failed to establish an essential element of the remaining crime of attempted grand larceny in the third degree, i.e., that the property was stolen.

Palisades Collection, LLC v Kedik, 2009 NY Slip Op 08259 (App. Div., 4th, 2009)

To establish standing to sue, plaintiff was required to submit admissible evidence that Discover assigned its interest in defendant's debt to plaintiff (see generally Rockland Lease Funding Corp. v Waste Mgt. of N.Y., 245 AD2d 779). Here, plaintiff submitted an affidavit from its agent with exhibits, including a printed copy of several pages from an electronic spreadsheet listing defendant's Discover account as one of the accounts sold to plaintiff. Contrary to the contention of plaintiff, the court properly determined that it failed to establish a proper foundation for the admission of the spreadsheet under the business record exception to the hearsay rule (see generally Speirs v Not Fade Away Tie Dye Co., 236 AD2d 531).

A business record is admissible if "it was made in the regular course of any business and . . . it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter" (CPLR 4518 [a]; see generally People v Kennedy, 68 NY2d 569, 579-580). "A proper foundation for the admission of a [*2]business record must be provided by someone with personal knowledge of the maker's business practices and procedures" (West Val. Fire Dist. No. 1 v Village of Springville, 294 AD2d 949, 950). Although plaintiff's agent averred that the spreadsheet was kept in the regular course of business and that the entries therein were made in the regular course of business, the agent did not establish that he was familiar with plaintiff's business practices or procedures, and he further failed to establish when, how, or by whom the electronic spreadsheet submitted in paper form was made (see CPLR 4518 [a]; West Val. Fire Dist. No. 1, 294 AD2d at 950). Furthermore, although an electronic record "shall be admissible in a tangible exhibit that is a true and accurate representation of such electronic record" (id.), plaintiff's agent failed to establish that the printed electronic spreadsheet submitted to the court was a true and accurate representation of the electronic record kept by plaintiff.

Others have posted more thorougly on these cases, so I'll leave it at this.

CPLR R. 3117 and the Missing Witness Charge

CPLR R. 3117 Use of depositions
(a) Impeachment of witnesses; parties; unavailable witness
(4)  the deposition of a person authorized to practice medicine may be used by any party without the necessity of showing unavailability or special circumstances, subject to the right of any party to move pursuant to section 3103 to prevent abuse

Lauro v City of New York, 2009 NY Slip Op 08186 (App. Div., 2nd, 2009)

Additionally, contrary to the defendants' contentions, the Supreme Court properly gave a missing witness instruction (see Taveras v Martin, 54 AD3d 667; Brown v City of New York, 50 AD3d 937). " [W]hen a doctor who examines an injured plaintiff on the defendant's behalf does not testify at trial, an inference generally arises that the testimony of such witness would be unfavorable to the defendant. The defendant may defeat this inference by demonstrating that the testimony would be merely cumulative, the witness was unavailable or not under the defendant's control, or the witness would address matters not in dispute'" (Hanlon v Campisi, 49 AD3d 603, 604, quoting Brooks v Judlau Contr., Inc., 39 AD3d 447, 449, revd 11 NY3d 204). Here, the defendants failed to defeat the inference (see Taveras v Martin, 54 AD3d 667; Brown v City of New York, 50 AD3d 937).

How do you go about getting the charge.  Taveras is instructive,

The Supreme Court did not err in granting the defendant's request for a missing-witness charge for Leo F. Taveras. A party seeking a missing-witness charge must "promptly notify the court that there is an uncalled witness believed to be knowledgeable about a material issue pending in the case, that such witness can be expected to testify favorably to the opposing party and that such party has failed to call him to testify" (People v Gonzalez, 68 NY2d 424, 427 [1986]). As the party opposing the missing-witness charge, the appellant failed to demonstrate that Leo F. Taveras was "unavailable, not under [his] control, or that [his] testimony would be cumulative" (Adkins v Queens Van-Plan, 293 AD2d 503, 504 [2002]). Leo F. Taveras was the operator of the vehicle in which the appellant was a passenger and he is also the appellant's brother. Thus, it is clear that Leo F. Taveras is favorably disposed to the appellant and under his control (see People v Marsalis, 22 AD3d 866, 868-869 [2005]). The appellant failed to demonstrate that Leo F. Taveras remained ill after his hospital release or was otherwise unavailable (compare People v Turner, 294 AD2d 192 [2002]).

And bringing it on home is Brown,

Contrary to the defendants' contention, the Supreme Court properly granted the plaintiffs' request for a missing witness charge with respect to the defendant Julio A. Torro, the driver of the vehicle that allegedly struck the van of the injured plaintiff Joe S. Brown. Torro, who at all relevant times was represented by counsel, and who had previously given deposition testimony, inexplicably failed to appear at the trial to testify. A jury may, but is not required to, draw the strongest inference that the opposing evidence permits against a party who fails to testify at trial (see Crowder v Wells & Wells Equip., Inc., 11 AD3d 360, 361 [2004]; Farrell v Labarbera, 181 AD2d [*2]715, 716 [1992]; see also Noce v Kaufman, 2 NY2d 347, 353 [1957]).
What happens in cases where a party takes the testimony of a non-treating doctor, perhaps a IME doctor or a peer review doctor, and uses that deposition at trial under CPLR R. 3117(a)(4)?  And assume the doctor is available to testify.  And of course, unavailable doesn't mean that the doctor might have something better to do that day.  What then?  Get your missing witness charge (PJI 1:75).  To sort of conclude:  Can you use the deposition?  Probably.  Can the other side get a missing witness charge?  Probably.  The next question is:  Is it worth it?  I'll get into that in a minute.

*intermission* Or, for the few no-fault types who read this blog, consider the case of the re-peer. */intermission*

A couple of months ago I tried to do some research on 3117(a)(4).  I was more or less trying to understand the impetus behind the provision.  As it turns out, I'm terrible at researching this.  I had a research librarian trying to help me out and I really couldn't get anything on it.  That said, I'm pretty sure it is a patient treating mechanism, not a money saving mechanism.  The only reason to have a rule that allows for doctors' depositions to be used at trial is to keep them out of court and in their offices, treating patients.  Lately, a few insurance companies have been using it as a money saving mechanism.  Have one doctor in their (ins co lawyer's) office all day doing depositions for various cases–the doctors get paid a fixed (lower) rate, and the insurance companies don't have to pay the doctors to appear at trial.  At trial, the insurance company lawyer reads the deposition into the record.  There is no doubt that CPLR R. 3117(a)(4) is being used as a money saving mechanism.  From experience, I can tell you that the doctors are available to testify.  There are days where they are in court to testify on over five cases for various insurers.  Do I blame them?  No, everyone needs to make a living. The point is, they aren't treating patients.  The depositions aren't allowing them to treat more patients.  They still come to court and testify on cases where depositions weren't held.

Like I said, and I could be wrong (but I doubt it) CPLR R. 3117(a)(4) was not intended to be a money saving mechanism.

Finally, and I alluded to this before, is this something a party really wants to do?  Depositions are a completely different animal than trials.  It's part of discovery.  Accordingly, there is a lot of leeway.  All those questions that you could never get away with at trial; you can ask them.  If the insurance company refuses to allow their doctor to answer and bust the deposition, well, that will be their problem.  Th
ere is a lot of interplay between IME doctors, Peer Review doctors, the vendors that work in-between the doctors and the insurance companies, and the insurance companies.  Do you really want these questions asked?  Do you want the answers memorialized?  I'd guess no.  But, I could always be wrong.  In the end, it could wind up costing far more than it would save.

Finally, using this rule is a ballsy move.  One that most parties wouldn't make but for desperation.  We can all agree that a jury wouldn't like it.  Would a Judge?  Would anyone feel comfortable telling the trier of fact, especially one that went to law school, and one who is smarter than your average Joe that, "Yes your honor, I didn't think it important that you see the witness.  No, you don't have to worry about the witness' demeanor.  It's fine, trust me".  And if the other side asked for a missing witness charge, how would you respond?

Something to think about.

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CPLR § 3218(b) Judgment by confession not filed within 3 years

CPLR § 3218 Judgment by confession

Shasho v Pruco Life Ins. Co. of N.J., 2009 NY Slip Op 08000 (App. Div., 2nd, 2009)

The plaintiff seeks a preliminary injunction based, in part, on her
contention that the confession of judgment was obtained in connection
with a usurious promissory note. "No law regulating the maximum rate of
interest which may be charged, taken or received shall apply to any
loan or forebearance in the amount of two million five hundred thousand
dollars or more" (General Obligations Law § 5-501[6][b]). Thus, the
plaintiff failed to establish a likelihood of success on her claim that
a promissory note that she and her late husband executed in favor of
the defendant, and upon which the confession of judgment was
predicated, is usurious, as the face of the note provides that the
amount owed was $3,500,000 (see General Obligations Law 5-501[6][b]; Tides Edge Corp. v Central Fed. Sav., 151 AD2d 741; see also Ujueta v Euro-Quest Corp., 29 AD3d 895; Hochman v LaRea, 14
AD3d 653, 654). Moreover, the confession of judgment was signed and
notarized on December 31, 2005, and, thus, at the time that the Supreme
Court determined that branch of plaintiff's motion which was for a
preliminary injunction, the three-year period for filing the confession
of judgment (see CPLR 3218[b]) had yet to lapse. Consequently,
the Supreme Court properly denied that branch of the plaintiff's motion
which was for a preliminary injunction enjoining the defendant from
entering, filing, and enforcing the confession of judgment. Further,
the Supreme Court properly permitted the release of the proceeds from
certain life insurance policies to the defendant.

Nonetheless, the defendant failed to file the confession of
judgment by December 31, 2008, and thus failed to file it within three
years after the plaintiff's affidavit of confession was executed.
Accordingly, the confession of judgment became void after that date (see CPLR 3218[b]; Ray v Ray, 61
AD3d 442, 443). Thus, in the order dated March 12, 2009, the Supreme
Court erred in granting that branch of the defendant's application
which was, in effect, to permit him to enter, file, and enforce the
confession of judgment.

The bold is mine

UPDATE (after argument): SCOTUS grants cert on CPLR § 901(b) issue

The Civil Procedure & Federal Courts Blog is on top of it.  The SCOTUS blog is all over it as well.

I posted about this case a little while ago here  and it was in the NYLJ Wrap-Up. I’m sure you’ve been wondering about it. I have.

You can read the transcript HERE.
Or, if you don’t want to get it from me, you can go over to The Civil
Procedure & Federal Courts Blog, and get it from them.

This post is a work in progress.  There will be additions and commentary as I continue to review the case and receive (or find) additional information.

CPLR 901(b) Unless a statute creating or imposing a penalty, or a minimum measure
of recovery specifically authorizes the recovery thereof in a class
action1, an action to recover a penalty, or minimum measure of recovery
created or imposed by statute may not be maintained as a class action.

FRCP 23 Class Actions

The Supreme Court of the United States recently granted cert in Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 129 S.Ct. 2160, 173 L.Ed.2d 1155, 77 USLW 3472, 77 USLW 3605, 77 USLW 3609 (U.S. May 04, 2009) (NO. 08-1008).  It made its way there through the Eastern District (466 F.Supp.2d 467) and the Second Circuit Court of Appeals (549 F.3d 137)

What's this all about? 

The short version:

Shady Grove (a Maryland corporation) brought a class action against Allstate (a Illinois corporation)  in Federal court suing for interest that is overdue from no-fault claims.  The underlying lawsuit involved a New York policy.  Those claims were paid, but for the interest.  Shady Grove argued that it could get into Federal Court through 28 U.S.C. § 1332(d)(2)(A), which gives the federal courts original jurisdiction in a class action where the amount in controversy is more that five-million dollars and diversity exists, and FRCP 23 allows class certification.

Allstate moved to dismiss, arguing that because interest is a "penalty", CPLR § 901(b) expressly prohibits such a class action2 and that because CPLR § 901(b) is a substantive rule, the Federal Court must apply it. Shady Grove argued that (1) it is a procedural rule and it is in conflict with FRCP 23 (the federal equivalent of CPLR § 901), which contains no identical or similar restriction;  (2) because it is a procedural rule, an Erie3 analysis requires that the Federal Court apply its own rule; and (3) it argued that the "unless clause" (see FN 1) of CPLR § 901(b) permits the lawsuit, even if the court finds it to be a substantive rule.

The district court agreed with Allstate and dismissed the action. It found that CPLR § 901(b) is substantive and therefore does not invoke either the Supremacy Clause4 or Erie.  Without class certification, Shady Grove was unable to maintain diversity jurisdiction.

At the Second Circuit, Shady Grove added an argument5 (a request really) in its reply brief; that the Court should certify the following question to the New York Court of Appeals: whether the interest provision is a "penalty within the meaning of CPLR § 901(b)."  The Second Circuit, upon Allstate's motion, struck that portion of the brief, because it should have been brought up in the initial brief.

The Second Circuit discussed each of Shady Grove's arguments.

The Court first addressed the Erie situation.  It found that FRCP 23 does not conflict with CPLR § 901(b); that there is no "direct collision" with § 901.  It reasoned that, because FRCP 23 does not determine which actions can or cannot be brought, "it leaves room for the operation of § 901(b)," finding it to be a substantive rule. 

But would the application of CPLR § 901(b) "serve the twin aims6 of Erie?  The Court answered in the affirmative. Not applying the rule would, according to the Court, encourage plaintiff' to file in the Federal Courts, rather than in New York.  And it would allow them to recover in Federal Court, when they could not in New York.

The Court then discussed Shady Grove's argument that under N.Y. Ins. Law § 5106(a)7 the lawsuit can be maintained via class action because 11 NYCRR § 65-3.9(c)8 contemplated class actions in this context, and therefore satisfies the exception clause of CPLR § 901(b).  In rejecting this argument, the Court found that § 65-3.9(c) did not specifically authorize9 class actions.  "At most,[the] regulation contemplates the recovery of a penalty in a class action."

The "questions presented" in the petition for cert are:

1. Can a state legislature properly prohibit the federal courts from using the class action device for state
law claims?

2. Can state legislatures dictate procedure in the federal courts?

3. Could state-law class actions eventually disappear altogether, as more state legislatures declare them offlimits to the federal courts?

——————-

1.  This is the unless clause.

2.  "…an action to recover a penalty, or minimum measure of recovery
created or imposed by statute may not be maintained as a class action."  CPLR § 901(b)

3. 
Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).  Under Erie, when a Federal Court sits in diversity jurisdiction, it must apply a states substantive law and the federal procedural law.  It's more complicated than it seems.  More information can be found on the case and the issue on wikipedia.

4. U.S. Const. art. VI, Cl. 2

This Constitution, and the Laws of the United States which shall be
made in Pursuance thereof; and all Treaties made, or which shall be
made, under the Authority of the United States, shall be the supreme
Law of the Land; and the Judges in every State shall be bound thereby,
any Thing in the Constitution or Laws of any State to the contrary
notwithstanding.

5. Shady Grove cited to Sperry v. Crompton Corp., 8 N.Y.3d 204 (Ct. App., 2007) in support of its request for certification.

6. (1) to discourage forum shopping and (2) inequitable administration of the laws.

7. § 5106(a) provides:

(a)
Payments of first party benefits and additional first party benefits
shall be made as the loss is incurred. Such benefits are overdue if not
paid within thirty days after the claimant supplies proof of the fact
and amount of loss sustained. If proof is not supplied as to the entire
claim, the amount which is supported by proof is overdue if not paid
within thirty days after such proof is supplied. All overdue payments
shall bear interest at the rate of two percent per month. If a valid
claim or portion was overdue, the claimant shall also be entitled to
recover his attorney's reasonable fee, for services necessarily
performed in connection with securing payment of the overdue claim,
subject to limitations promulgated by the superintendent in regulations.

8. § 65-3.9(c) provides:

(c) If
an applicant does not request arbitration or institute a lawsuit within
30 days after the receipt of a denial of claim form or payment of
benefits calculated pursuant to Insurance Department regulations,
interest shall not accumulate on the disputed claim or element of claim
until such action is taken. If any applicant is a member of a class in
a class action brought for payment of benefits, but is not a named
party, interest shall not accumulate on the disputed claim or element
of claim until a class which includes such applicant is certified by
court order, or such benefits are authorized in that action by
Appellate Court decision, whichever is earlier. (emphasis added)

9.  The Court is referring to this portion of CPLR § 901(b) (which is quoted in its entirety at the top of this post): "Unless a statute creating or imposing a penalty, or a minimum measure
of recovery specifically authorizes the recovery thereof in a class
action." (emphasis added).  See FN 1.

Forum Non Con: CPLR R. 327

CPLR R. 327 Inconvenient forum

Tiger Sourcing (HK) Ltd. v GMAC Commercial Fin. Corporation-Canada, 2009 NY Slip Op 07828 (App. Div., 2nd, 2009)

CPLR 327 "permits a court to stay or dismiss such actions where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere" (Islamic Republic of Iran v Pahlavi, 62 NY2d 474, 478-479, cert denied 469 US 1108). The defendant bears the burden in a motion to dismiss on the ground of forum non conveniens to "demonstrate relevant private or public interest factors which militate against accepting the litigation" (id.). On such a motion, the Supreme Court is to weigh the parties' residencies, the location of the witnesses and any hardship caused by the choice of forum, the availability of an alternative forum, the situs of the action, and the burden on the New York court system (see Prestige Brands, Inc. v Hogan & Hartson, LLP, 65 AD3d 1028; Turay v Beam Bros. Trucking, Inc., 61 AD3d 964, 966). No one factor is dispositive (see Turay v Beam Bros. Trucking, Inc., 61 AD3d at 966; Brinson v Chrysler Fin., 43 AD3d 846, 848). The Supreme Court's determination should not be disturbed unless the court improvidently exercised its discretion or failed to consider the relevant factors (see Smolik v Turner Constr. Co., 48 AD3d 452, 453-454; Brinson v Chrysler Fin., 43 AD3d at 848).

Under the circumstances of this case, the Supreme Court providently exercised its discretion in granting that branch of the defendants' joint motion which was to dismiss the complaint on the ground of forum non conveniens (see Islamic Republic of Iran v Pahlavi, 62 NY2d 474; Prestige Brands, Inc. v Hogan & Hartson, LLP, 65 AD3d 1028; Turay v Beam Bros. Trucking, Inc., 61 AD3d 964; Smolik v Turner Constr. Co., 48 AD3d 452; Stravalle v Land Cargo, Inc., 39 AD3d 735, 736).

The bold is mine.