New York Civil Law

New York Governor Hochul Vetoes Bill Concerning General Jurisdiction Over Foreign Corporations - Doing Business in New York State

New York Governor Hochul recently vetoed a bill that could have affected companies doing business in the state. The New York Legislature may revisit a similar bill in the future, so businesses should stay vigilant.

The bill focused on New York courts' jurisdiction over lawsuits involving foreign corporations, referring to the court's authority in the state to hear cases related to those companies.

Under the bill, a foreign corporation applying to do business in New York would imply consent to the jurisdiction of New York courts. New York law does not give a straightforward definition of the term, foreign corporation—i.e., “Every corporation that is not a domestic corporation is a foreign corporation.“ “A ‘domestic corporation’ is a corporation created by or under the laws of the state, or a corporation located in [New York] and created by or under the laws of the United States, or a corporation created by or pursuant to the laws in force in [New York before April 19, 1775].”

Governor Hochul's veto prevented potential costs and inconveniences for foreign corporations, as the bill would have subjected them to lawsuits in New York regardless of their connection to the state. Hochul explained the veto aimed to avoid uncertainty for businesses and prevent burdening the judicial system. (Download Veto Message) 

General jurisdiction is not the sole way a New York court can have authority over a foreign company. The court can also consider a foreign company's connections with New York when determining jurisdictional issues. For foreign companies facing a New York lawsuit, consulting with an attorney is advisable to discuss jurisdictional issues.

New York Courts, The Affordable Care Act, and CPLR 4545

The New York Appellate Division recently addressed whether health insurance available under the Affordable Care Act could offset the costs of an award for future medical expenses in personal injury lawsuits. In Liciaga v New York City Tr. Auth., the Court concluded that the defendant should have the opportunity to raise the issue at a collateral source hearing, potentially allowing the defendants to reduce future medical expenses awards. An offset in a catastrophic injury case can be a game changer. In Liciaga, a reduction of $3.75 million was on the line.

The plaintiff in Liciaga sustained severe injuries that required significant future medical care,  and a Kings County jury awarded $40 million for the plaintiff’s future medical expenses. Post-verdict, the defendant argued that since the ACA guarantees access to health insurance for individuals with preexisting conditions, the plaintiff could secure a policy to reduce his future medical costs substantially.

The Appellate Division agreed with the defendant’s argument. The Court concluded that the defendant showed that this insurance would reduce future medical costs by millions, satisfying the CPLR 4545 standard that offsets should be applied when reasonably certain collateral sources could cover future costs. The Court held as such even though the plaintiff did not have the coverage. Stating that the plaintiff had a duty to mitigate damages, the Court concluded that the duty included obtaining insurance to offset medical costs when such coverage was reasonably available.

To be clear, the Court did not conclude that the defendant was entitled to the offset. Because the trial court had denied the defendant’s request to hold a collateral source hearing, the Appellate Division remitted the matter to the trial court to hold a hearing on the issue of future medical expenses and a determination as to any collateral source offsets to which the defendant may be entitled.

The Liciaga decision is important for post-judgment litigation and can reduce a future medical expense award by several thousands or millions of dollars.

New York Appellate Division Reminds Practitioners About Time Limit to Challenge A Referee's Order

In a recent decision, the Appellate Division, First Department upheld the motion court's sua sponte finding that the defendants' challenge to the discovery referee's letter order was time-barred. Under CPLR § 3104 (d), the time period for an application to review a referee's order is within five days after the order is made.

New York Appellate Division, First Judicial Department Grants Spoliation Sanctions for Destroyed Personal Journal

The plaintiff or defendant in your case destroyed a piece of evidence you deem essential to your case. You liken the spoliation to Arthur Andersen shredding documents for Enron and seek the ultimate sanction of dismissal of the case (plaintiff's spoliation) or striking the answer (defendant's spoliation). New York courts have a different idea, though.

In a recent New York Appellate Division, First Department appeal -- Clarke v Povella -- the spoliation was substantial. In Clarke, the plaintiff commenced a lawsuit against defendants concerning a motor-vehicle/pedestrian accident. The plaintiff alleged emotional and psychological injuries from the accident.

Through the plaintiff's deposition, the defendants learned that the plaintiff kept a private journal. At the deposition, the defendant requested production of the journal. The plaintiff's attorney apparently did not move for a protective order to quash the demand. The plaintiff allegedly claimed she lost the journal, giving vague reasons why she did not preserve the journal once the defendant requested production of it.

The First Department concluded that the defendant's demand for the journal was not beyond the scope of disclosure, disagreeing with the trial court. The First Department reasoned that the journal was discoverable material even though it contained private information, noting that the plaintiff put her emotional and psychological state at issue and the journal could shed light on those allegations.

Notably, the First Department cited to the New York Court of Appeals' decision in Forman v Henkin, which discussed discovery as it applied to social media and, in particular, Facebook. Citing Forman, the First Department noted that the defendants were not required to meet any special threshold burden to maintain the journal. The Court's point being that New York's discovery rules are broad and material will be subject to discovery where there is a showing that it is likely to lead to "material and necessary" information.

The First Department held that spoliation sanctions were warranted because the plaintiff had an obligation to preserve the journal once the defendants demanded it during the plaintiff's deposition; the Court stated that the plaintiff was grossly negligent in failing to preserve the journal. Nevertheless, the Court concluded that an adverse inference jury charge was more appropriate -- i.e., a charge that the contents of the journal likely would have been relevant to the plaintiff's emotional and psychological claims. Choosing to not impose the ultimate sanction, the Court reasoned that the defendants had access to information on her psychological health through authorizations to the plaintiff's psychological treatment. The Court also reasoned that the plaintiff testified about her psychological health at her deposition. 

The lesson in Clarke is an attorney should immediately move for a protective order when he or she deems a discovery request is beyond the scope of discovery. For a non-spoliating party, you can surely ask for the ultimate sanction but know that the court will make all efforts to fashion a remedy that punishes the spoliating party and still allows the case to be decided on the merits.

Photo Credit: Sh4rp_i

(40 years ago this week, Daryl Hall and John Oates were halted at No. 3 on the Billboard 100 for the pulsating pop hit, "Maneater.")

New York Court of Appeals Will Hear Oral Argument Today Re: Whether Verified Pleading Suffices to Raise Issue of Fact on Summary Judgment

The New York Court of Appeals will hear oral argument today in Sanchez v. Nat'l R.R. Passenger Corp., among other appeals (here is the summary). The case addresses an interesting issue concerning evidentiary proof in a summary judgment motion. The appeal turns on when the plaintiff's accident occurred; there is a statute of limitations issue here. At her deposition, the plaintiff could not recall the exact date of her accident. An accident report places the accident at an earlier date than the date the plaintiff alleges in her verified pleadings. 

The Court will address whether, even in the face of the plaintiff's deposition testimony, her verified pleading can raise a material issue of fact regarding the date when the accident occurred and, as such, when her claim accrued for statute of limitations purposes.

New York Court of Appeals Hears Oral Argument Today on CPLR article 52 Issue

The New York Court of Appeals will hear, among others, oral argument in Verizon New England Inc. v. Transcom Enhanced Servs., Inc. The case concerns nuances of enforcing a judgment in New York (see appeal summary here).

New York Evidence/New York Court of Appeals Grants Motion for Leave to Appeal - Secondary Evidence

Clarke v. Rodriguez (Motion for leave to appeal granted on Nov. 23, 2010)

73 A.D.3d 677 (2d Dep’t 2010)

 Trial attorneys will want to follow this appeal concerning a point of a little-discussed exception to the best evidence rule.  The appeal concerns the admission of secondary evidence.  A proponent of an written instrument who is unable to produce the paper because it is under the control of the opponent may produce secondary evidence of what is contained in the original instrument.

 The defendant appealed a Supreme Court judgment that, after a nonjury trial, was in favor of the plaintiff and against him directing specific performance for the sale of real property.  Supreme Court allowed the plaintiff to submit secondary evidence of the contents of the original contract of sale.  The Second Department concluded that the plaintiff sufficiently explained the unavailability of the primary evidence -- i.e., the contract of sale for the real property.  The plaintiff established that the defendant’s former attorney, who did not testify at the trial, possessed the original contract of sale.

 The Court will revisit its holding in Schozer v. William Penn Life Ins. Co. of N.Y., 84 N.Y.2d 639 (1994). 

 

Arbitration/New York Court of Appeals Grants Leave to Appeal - Vacating Award Based on Bias or Partiality

 U.S. Electronics, Inc. v. Sirius Satellite Radio, Inc. (Motion for leave to appeal granted on Nov. 18, 2010)

73 A.D.3d 497 (1st Dep’t 2010)

This appeal addresses the judicial review of arbitration awards and in what instances may a court vacate an arbitration.  The arbitration concerned a contractual dispute between the petitioner and satellite radio company Sirius Satellite Radio, Inc.  By way of background, Sirius and former competitor XM Satellite Radio announced a merger in February 2007.  The merger was subject to the approval of the Federal Communications Commission.

The petitioner in the appeal argued that the chairman of the arbitration panel improperly failed to disclose the relationship between his son, who is a congressman, and Sirius.  The chairman’s son publicly supported the merger between Sirius and XM.

The First Department noted that the chairman should have disclosed his son’s position irrespective of when the petitioner learned of the congressman’s support of the intended merger.  Nevertheless, the First Department held that the petitioner failed to meet its burden of proving by clear and convincing evidence that any impropriety or misconduct of the arbitrator prejudice its rights or the integrity of the arbitration process or award.  It proffered no proof of actual bias or even the appearance of bias on the part of the chairman.

The Court of Appeals will likely address whether the undisclosed facts provided a basis for challenging the arbitration award and set out a bright-line for future matters.

 

New York Court of Appeals Recently Holds That CPLR 2001 May Cure Defect In Service of Summons and Complaint In Some Instances

Even though the CPLR is clear on this point, litigants still seem to make mistakes when serving their summons and complaints.  In Ruffin v. Lion Corp., 2010 N.Y. Slip Op. 8767, 2010 N.Y. LEXIS 3464 (Nov. 30, 2010), the plaintiff used a process server who was not a New York resident to serve the defendants with the summons and complaint concerning her personal-injury action.  Two years after a default judgment was entered against the defendant, it moved to dismiss the action under CPLR 3211(a)(8) and to vacate the default judgment.  The defendant argued that the process server was not authorized under CPLR 313 to effect service in Pennsylvania because he was not a New York resident, he was not a sheriff authorized to make service by Pennsylvania law, and he was not an attorney, solicitor, barrister or equivalent.

The plaintiff conceded that the process server was not authorized to make service in Pennsylvania but challenged the jurisdictional implication of the improper service by relying on CPLR 2001.  CPLR 2001, among other things, applies to the commencement of an action regarding mistakes in the filing process. The Court of Appeals concluded that the error regarding the plaintiff’s failure to fulfill the service requirements of CPLR 313 could be disregarded.  Analyzing CPLR 2001 and the legislative history of its recent amendment, the Court concluded that CPLR applies to both non-prejudicial defects in filing and service of initiatory papers such as a summons and complaint.

The Court pointed out that the CPLR 2001 point was not dispositive because the service of initiatory papers also implicated due process concerns of notice.  The Court noted that courts should analyze whether the error is merely technical or one that impacted whether notice was reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.  The Court provided two examples where an error was more than just a technicality: (1) simply mailing the document to the defendant or e-mailing them to the defendant’s web address, or (2) the delivery of a summons and complaint to the wrong person.  The Court noted that delivery of a summons and complaint by a process server who is unauthorized to serve simply because of his place of residence will not affect the likelihood that the summons and complaint will reach defendant and inform him that he is being sued.  As such, the Court concluded that a defect related to the residence of a process server has no effect on the likelihood of defendant's receipt of actual notice, and the court may choose to correct or disregard it as a technical infirmity under CPLR 2001.

 This opinion serves as a reminder that these procedural details should be followed closely when initiating an action to avoid unnecessary motion practice.  On the other side of the caption, defendants should not gloss over analyzing these details upon receiving these initiatory papers.

 

New York Court of Appeals Grants Leave to Appeal Regarding Emergency Doctrine Instruction

Last week, the New York Court of Appeals granted leave to appeal in Lifson v. City of Syracuse.  The issue likely to be decided is whether a trial court can instruct a jury on the emergency doctrine where the evidence does not support that a weather or lighting condition was sudden or unforeseen.

In Lifson, the defendant driver injured the decedent pedestrian after striking her with his motor vehicle.  The defendant stopped at a stop sign at the intersection in question.  He looked to the left and to the right and the proceeded to make a left turn.  The defendant claimed that, as he was in the process of making the left turn, his vision was momentarily obstructed by sun glare.  He took his eyes off the road and, when he looked back up again, he observed decedent approximately one foot in front of his vehicle.  The defendant "slammed" on the brakes but was unable to avoid hitting the decedent.

The Fourth Department Majority concluded, among other things, that the trial court did not err by giving an emergency instruction with respect to the assertion of the defendant that he failed to observe the decedent because he was blinded by sun glare.  The Court reasoned that there was a reasonable view of the evidence establishing that the sun glare was a sudden and unforeseen circumstance justifying the emergency instruction.

Justice Peradotto dissented, noting that she agreed with the plaintiff that Supreme Court erred in giving an emergency instruction with respect to the assertion of the defendant that he failed to observe the decedent because he was blinded by sun glare.  Justice Peradotto noted that the defendant never testified at trial that he was unaware that the sun was out or that he did not expect to be driving into the sun when he turned left to travel west.  

Justice Peradotto concluded that

[The] defendant should have anticipated the possibility that he might encounter glare from the sun when he began to turn his vehicle to travel west into the setting sun.  Because the condition defendant faced was not unexpected in light of the sunny weather and the time of day, [the] defendant was not entitled to the benefit of an emergency instruction.

New York Civil Law will keep you apprised of the developments on this appeal 

Rare Dissent In New York Court of Appeals' Dismissal of Appeal As of Right

We've all read the short entries from the New York Court of Appeals regarding appeals as of right and motions for leave to appeal.  They're enigmatic to most.  The conciseness often demonstrates that the Court jealously guards its jurisdiction.

Although not unheard of, there is rarely a dissent when the Court dismisses an appeal as of right.  It's even more unheard of to have a dissent criticize the Court's internal jurisdictional precedent.

Yesterday, Judge Smith dissented in Matter of Kachalsky v. Casace regarding the Court's dismissal of the appeal as of right pursuant to CPLR 5601(b)(1).  The petitioner was challenging Penal Law sec. 400.00(2)(f), which requires "proper cause" for the issuance of a license to carry a concealed pistol or revolver.

It appears that the Majority determined that the appeal was not "substantial," which is a Court interpretation of one of the requirements of an appeal as of right under CPLR 5601(b).  The word "substantial" can be amorphous.  I once overhead a legendary Court of Appeals' Deputy Clerk tell a pro se petitioner that a "substantial" constitutional question is like a tough stain on a shirt, not like the ordinary daily stains that we all get and rub out with some elbow grease.  

In Casace, Judge Smith took issue with the Court's application of the "substantiality" requirement in the past and in the present appeal, noting that the Court's treatment conferred discretion similar to whether the Court should grant a motion for leave to appeal.  Clearly, the New York Constitution and the CPLR does not want the Court to treat appeals as of right as if it were determining whether to grant or deny motions for leave to appeal.

Although enigmatic in its own right, Judge Smith's dissent offers a rare peak behind the curtain that is the New York Court of Appeals' internal jurisdiction.