Opportunity to Comment on Proposed Change to Commercial Division Rules

The Administrative Board of the Courts has asked for public comment on a proposed change to the Commercial Division rules that provides “sample ‘privilege claw-back’ language for use in the standard form of stipulation and order for the production of confidential information in matters before the Commercial Division.”

E-mail comments on this proposal to rulecomments@nycourts.gov by January 16, 2018.

Party Not Entitled to Commission for Out-of-State Deposition

On November 16, 2017, the First Department issued a decision in Matter of Part 60 RMBS Put-Back Litigation, 2017 NY Slip Op. 08093, holding that a party had not justified the issuance of a commission for an out-of-state deposition, explaining:

“[W]e deny the motion, since defendant did not demonstrate that a commission is necessary or convenient. In particular, defendant’s motion papers did not include allegations that the proposed out-of-State deponents would not cooperate with a notice of deposition or would not voluntarily come within this State or that the judicial imprimatur accompanying a commission will be necessary or helpful. However, since defendant can cure this defect, we make the denial of the motion without prejudice.

(Internal quotations and citations omitted) (emphasis added).

Non-Party With Knowledge of Order Held in Contempt for Violating It

On November 14, 2017, the First Department issued a decision in Tishman Construction Corp. v. United Hispanic Construction Workers, Inc., 2017 NY Slip Op. 07967, holding a non-party in contempt for violating an order of which he had knowledge, explaining:

The court properly found that appellants disobeyed the stipulation and order, which was negotiated by the parties and set forth the conditions for protests held by UHCW. These conditions expressed an unequivocal mandate of which appellants were well aware, and their violation of the order prejudiced plaintiffs’ right to conduct business without disturbance, thus justifying the finding of contempt.

The court properly exercised jurisdiction over Rodriguez, who is president of UHCW and who signed the 2012 stipulation and order that was subsequently violated. Although Rodriguez was not personally served in the action, it is undisputed that he was involved in the negotiation of the stipulation, and was knowledgeable of the conditions set forth therein. Furthermore, the evidence presented at the contempt hearing demonstrated that Rodriguez himself violated the court’s mandates. Under these circumstances, Rodriguez, even as a nonparty, can be punished for UHCW’s violations of the stipulation and order.

(Internal quotations and citations omitted).

Resolving Split, Third Department Rules That Motion to Amend Requires No Showing of Merit

On November 9, 2017, the Third Department issued a decision in NYAHSA Services, Inc., Self-Insurance Trust v. People Care Inc., 2017 NY Slip Op. 07918, resolving a split between the appellate divisions by holding that a motion to amend requires no showing of merit, explaining:

Pursuant to CPLR 3025(b), a party may amend its pleadings at any time by leave of the court, which shall be freely given upon such terms as may be just. It has long been recognized that the decision whether to grant leave to amend pleadings rests within the trial court’s sound discretion and, absent a clear abuse of that discretion, will not be lightly cast aside. We have previously adhered to a rule requiring the proponent of a motion for leave to amend a pleading to make a sufficient evidentiary showing to support the proposed claim, that is, to make an evidentiary showing that the proposed amendments have merit. However, we are persuaded to depart from that line of authority and follow the lead of the other three Departments, and we now hold that no evidentiary showing of merit is required under CPLR 3025(b). Thus, the rule on a motion for leave to amend a pleading is that the movant need not establish the merits of the proposed amendment and, in the absence of prejudice or surprise resulting directly from the delay in seeking leave, such applications are to be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit. The rationale for adopting this rule is that the liberal standard for leave to amend that was adopted by the drafters of the CPLR is inconsistent with requiring an evidentiary showing of merit on such a motion. If the opposing party on a motion to amend wishes to test the merits of the proposed added cause of action or defense, that party may later move for summary judgment or to dismiss upon a proper showing.

(Internal quotations and citations omitted) (emphasis added).

Successor Judge Should Have Adhered to Prior Judge’s Holdings Under Law of Case Doctrine

On November 9, 2017, the First Department issued a decision in Glaze Teriyaki, LLC v. MacArthur Properties I, LLC, 2017 NY Slip Op. 07770, holding that it was error for a successor judge not to adhere to a prior judge’s holdings under the law of the case doctrine, explaining:

Despite its earlier ruling that Justice Bransten’s orders were the law of the case and that the only issue at trial was whether the Code violation had been cured, the trial court issued an order after trial, entered June 1, 2016, that found that defendant had failed to establish any violation of the Code, determined that the notice of cancellation was null and void, and enjoined defendant from terminating the lease based upon the notice. The court dismissed defendant’s first, second, third and sixth counterclaims, and referred the remaining counterclaims to a special referee to determine the amount of outstanding rent and/or use and occupancy and other charges owed. Defendant now appeals from that order.

The law of the case doctrine is designed to eliminate the inefficiency and disorder that would follow if courts of coordinate jurisdiction were free to overrule one another in an ongoing case. Here, the trial court was prohibited from finding that plaintiff’s commercial kitchen exhaust system did not violate the Mechanical Code. The trial court adopted the earlier finding by Justice Bransten, referenced in the February 18, 2014 order, when it held that her orders were the law of the case, and limited the issue at trial as set forth above.

Plaintiff was afforded a full and fair opportunity to litigate this issue before Justice Bransten, and was offered the opportunity, if it wished, to schedule cross-examination of defendant’s expert. It did not do so, and essentially conceded the existence of the Code violation when its counsel responded, Fair enough, to the court’s directive on December 17, 2013 that the violation be cured at plaintiff’s expense.

(Internal quotations and citations omitted).

Reports Prepared by Consultant During Investigation of Claims Held Not Privileged or Work Product

On November 9, 2017, the Third Department issued a decision in NYAHSA Services, Inc., Self-Insurance Trust v. People Care Inc., 2017 NY Slip Op. 07909, holding that a report evaluating litigation claims prepared by a consultant engaged by counsel was not privileged or entitled to protection as work product, explaining:

During this collection litigation, Cool made a discovery request to produce a report commissioned by defendant’s then-counsel, Whiteman Osterman and Hanna, LLP (hereinafter WOH) and prepared by a consultant, Towers Perrin, regarding Cool’s management and administration of the workers’ compensation claims of defendant’s employees. Cool also sought documents and written communication related to that report. Defendant refused to comply with the discovery request, claiming that the materials were protected by, among other things, the attorney-client privilege. Cool and plaintiff then moved to compel production of the requested report and materials. Supreme Court examined the requested materials in camera and partially granted the motions to compel, ordering defendant to disclose the report and related documents, but denied disclosure as to one email exchange between defendant’s executives and WOH attorney Joel Hodes. Defendant appeals.

. . .

Defendant argues that the report was protected by the attorney-client privilege, as attorney work product and as material prepared in anticipation of litigation. Supreme Court properly rejected these claims. The attorney-client privilege shields from disclosure any confidential communications between an attorney and his or her client made for the purpose of obtaining or facilitating legal advice in the course of a professional relationship. As the party asserting the privilege, defendant was required to show that the communication at issue was between an attorney and a client for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship, that the communication is predominantly of a legal character, that the communication was confidential and that the privilege was not waived.

The record, including the report itself, reflects that WOH, defendant’s counsel, retained Towers, an independent claims consultant, to undertake a comprehensive claims review to include the trust’s reserve practices and Cool’s administration of claims of defendant’s employees, in order to resolve the parties’ impasse over defendant’s unpaid assessments. Towers was given in-house access to Cool’s documents for this purpose in addition to supporting documentation already provided by Cool. To that end, defendant’s president sent a letter to Cool’s vice-president reflecting that the purpose of the consultant’s review of Cool’s records was to facilitate an intelligent conversation with Cool’s claims department, which Supreme Court aptly characterized as a typical business purpose. Cool’s vice- president submitted an affidavit attesting that it was his understanding that the purpose of the consultant’s review was to verify the accuracy of the assessments billed to defendant, and that Towers assured him that it would discuss its findings with Cool; another Cool vice-president attested that Towers did share certain findings with Cool, including that it did not find any problems with inappropriate payment of claims by Cool.

As Supreme Court correctly concluded, the report does not include any legal advice, legal analysis or discussion of legal issues nor does it disclose confidences of defendant, and we further note that it was based almost exclusively on information provided by Cool and, as such, it is not a communication of a legal character. Further, we discern no error in the court’s conclusion — after crediting the proof that defendant did not expect that the report would remain confidential and that the contents of the report were not, in fact, kept confidential — that the report was not a confidential communication, and that any privilege was waived. Thus, the report was not protected by the attorney-client privilege.

We further find that the report was not protected from disclosure as attorney work product, as this privilege should be narrowly applied to materials prepared by an attorney, acting as an attorney, which contain his or her analysis and trial strategy.

Materials such as reports prepared by a third party, a nonlawyer consultant, during an investigation do not ordinarily qualify under this exception. Notably, the report does not incorporate information or opinions from counsel or discuss legal issues or conclusions. Further, the report was prepared in connection with a billing dispute, not pending litigation, and cannot be classified as an adjunct to the lawyer’s strategic thought processes so as to qualify, on this alternative theory, for an exemption from disclosure as attorney work product.

With regard to the claim that the report was protected from disclosure as material prepared for litigation, defendant’s burden was to demonstrate that the report was obtained solely for litigation purposes, which cannot be satisfied with wholly conclusory allegations. Mixed or multipurpose reports are not free from disclosure. We discern no abuse of discretion in Supreme Court’s conclusion that defendant did not make the requisite showing that the report was prepared exclusively in anticipation of litigation. While defendant’s chief executive officer reportedly believed that Cool’s demands for payment of the assessment raised the possibility of litigation and that defendant thereafter retained WOH to assess its liability, the court rightfully relied upon contemporaneous correspondence from defendant’s vice-president to Cool indicating that the purpose of the Towers review was to facilitate negotiations, i.e., intelligent conversation, and come to a resolution over the disputed invoices. As the record supports the court’s conclusion that the report was partly, if not primarily, for business purposes and not solely for litigation, we find that defendant has not demonstrated that it was protected from disclosure on this or any of the bases claimed.

(Internal quotations and citations omitted).

Court Decides Forum Non Conveniens Motion Without Deciding Personal Jurisdiction Issues

On October 30, 2017, Justice Friedman of the New York County Commercial Division issued a decision in Estate of Kainer v. UBS AG, a Swiss Corp., 2017 NY Slip Op. 32316(U), deciding a forum non conveniens motion without first determining whether the court had jurisdiction over the moving defendant, explaining:

As a threshold matter, the parties dispute whether this court must determine the claims of lack of personal jurisdiction, asserted by defendants UBS AG, the Foundation, and Kircher, before the court entertains these defendants’ motion to dismiss on the ground of forum non conveniens. In Sinochem International Co. Ltd. v. Malaysia International Shipping Corp, . . . the Supreme Court held that a court is not required to determine whether it has personal jurisdiction over the defendant before dismissing an action based on the common law forum non conveniens doctrine, The Court reasoned that because a forum non conveniens dismissal is not a dismissal on the merits, a court may choose among threshold non-merits grounds for dismissal. The Court further held, however, that judicial economy and the consideration ordinarily accorded the plaintiff’s choice of forum favor the court’s determination of the jurisdictional issue first, if the determination can readily be made and will involve no arduous inquiry. In contrast, where personal jurisdiction is difficult to determine, and forum non conveniens considerations weigh heavily in favor of dismissal, the court properly takes the less burdensome course and may dismiss the action without a prior jurisdictional determination.

In New York, there are two long-standing, conflicting lines of authority on this threshold issue, The first holds that the court must address the jurisdictional issue before deciding whether dismissal is warranted based on the forum non conveniens doctrine because, if a court lacks jurisdiction over a defendant, it is without power to issue a binding forum non conveniens ruling as to that defendant. The second holds that a court presuming, without deciding jurisdiction, may address the issue of whether the action should be dismissed on the forum non conveniens ground.

Although the weight of appellate authority in this Department requires a court to address jurisdictional issues before undertaking a forum non conveniens analysis, the Appellate Division decisions do not discuss the reasoning of Sinochem and do not discuss the conflicting lines of authority. Based on a close reading of the cases, this court finds that the lines of authority do not appear to be reconcilable based on factual differences. The Court of Appeals has not addressed the issue, although dictum in a pre-Sinochem decision stated that the doctrine of forum non conveniens is inapplicable unless personal jurisdiction has been obtained. Absent binding authority to the contrary, the court follows the second line of cases and Sinochem, which the court finds to be
more persuasive.

(Internal quotations and citations omitted). The court went on to grant the motion to dismiss based on forum non conveniens.

Court Allows Contract Claim Based on Defendant’s Alleged Control of Contracting Party

On October 24, 2017, Justice Bransten of the New York County Commercial Division issued a decision in Shawmut Woodworking & Supply, Inc. v. 3 BP Property Owner LLC, 2017 NY Slip Op. 32318(U), allowing a breach of contract claim to go forward against a party that did not sign the contract based on the defendant’s alleged control of the contracting party, explaining:

Shawmut alleges that Asics exercised actual authority over Windsor by and through the terms of the Master Retailer Agreement. Shawmut further alleges that a doctrine of actual authority exists which would impute liability upon Asics for Windsor’s default. . . .

While the use of the phrase doctrine of actual authority is unclear, this court’s duty is to accord the facts and claims of the complaint every favorable inference. The court may rely upon factors other than the complaint to determine whether the Plaintiff has adequately, if not artfully, pled a claim.

Here, Shawmut states with specificity that Asics directly communicated with both Shawmut and Windsor, Asics was supplied with design details by Shawmut, and specifically exercised control over the project by approving the design, layout, features, and overall look of the store. Asics was believed to have also controlled the costs of construction by increasing costs and creating change orders.

Shawmut’s Director of Business Development, James Scarpone further supplied an Affidavit in relation to this motion to dismiss. This affidavit stated that representatives of Asics visited the site to observe the progress of construction. Scarpone later flew to Asics headquarters in Irvine, California to discuss additional work for the New York Store with representatives of both Asics and Windsor. Scarpone believed Asics controlled the decision-making process for the design, approval, and funding of the work.

Shawmut further alleges in its complaint that Asics exercised authority over Windsor by and through the terms of the Master Retailer Agreement. . . . The MR Agreement outlines that all of the Asics’ brand stores owned and operated by Windsor were to be operated to Asics’ specifications, standards, and in accordance with Asks operating procedures. Asics was to train Windsor and Windsor’s store managers, and have access to the stores systems. Asics was also granted the right to assume and manage any of Windsor operated Asics brand stores in the event the MR Agreement was terminated, as well as hold a security interest in all goods, inventory, equipment, fixtures, furniture, and improvements now or hereafter situated on or relating to the operation of any store, and to all property bearing Asics’ Trademarks and all proceeds therefrom.

This court must accept the allegations of the complaint as true. The essence of Plaintiff’s claim against Asics is that Asics abused Windsor’s corporate autonomy through the constraints of the MR Agreement and that this abuse is the basis for liability against Asics. Together, the Second Amended Complaint, the Scarpone Affidavit, and the Master Retailer Agreement state a claim that is based upon the total control Asics was able to, allegedly, assert over Windsor.

Given that the standard on a 3211(a)(7) motion to dismiss is to determine whether Plaintiff has plead a legal claim, and Plaintiff has pled a claim based upon Asics’ apparent control over Asics’ brand stores operated by Windsor the dismissal of this claim is not appropriate at this time. Shawmut should be given the opportunity to prove its claim that Asics’ controlled the decision-making process for design, approval, and funding of the work.

(Internal quotations and citations omitted).

Agreement Binding Even Though Parties Envisioned Further Negotiations Over Non-Material Terms

On November 9, 2017, the Fourth Department issued a decision in RES Exhibit Services, LLC v. Genesis Vision, Inc., 2017 NY Slip Op. 07796, holding that an agreement was a binding contract even though the parties had agreed further to negotiate some of the agreement’s terms, explaining:

In determining whether a contract exists, the inquiry centers upon the parties’ intent to be bound, i.e., whether there was a meeting of the minds regarding the material terms of the transaction. It is well settled that, if an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract. A mere agreement to agree, in which a material term is left for future negotiations, is unenforceable. Nonetheless, the doctrine of definiteness should not be applied rigidly, and striking down a contract as indefinite and in essence meaningless is at best a last resort. Thus, where it is clear from the language of an agreement that the parties intended to be bound and there exists an objective method for supplying a missing term, the court should endeavor to hold the parties to their bargain.

Here, the parties unequivocally expressed their intent to be bound by the agreement inasmuch as they agreed that plaintiff would be the exclusive provider of various services and deliverables for the trade shows as set forth in specifically designated PAFs, and that defendant’s failure to perform pursuant to the terms of the agreement would constitute grounds for termination of the agreement and liquidated damages. The parties further agreed in the amendment and incorporated PAFs that a total of four shows in 2015 and 2016 would have a certain fixed cost representing the construction cost for the exhibit amortized over those shows. The amendment and the incorporated PAFs, when read in conjunction with the termination provision, further establish that defendant was obligated to attend the four shows and spend a minimum amount on services and deliverables; otherwise, plaintiff would be entitled to liquidated damages.

The agreement itself is therefore sufficient to establish a binding contract inasmuch as the parties agreed to a fixed cost for each show that defendant was required to attend and set a minimum amount that defendant was obligated to spend in aggregate over the four shows, and the parties simply left the precise scope of work and variable costs to be customized to fit each show in accordance with the service categories listed in the pre-designated PAFs. Contrary to defendant’s contention, a contract is not necessarily lacking in all effect merely because it expresses the idea that something is left to future agreement and, here, the agreement contains no expression by the parties that they did not intend to be bound until each PAF was signed. We thus conclude that the agreement, as executed by the sophisticated parties here, clearly manifests their intention to be bound, and the creation of a binding agreement is not conditioned upon the signing of each individual PAF.

We also reject defendant’s related contention that the agreement is unenforceable because it contemplated future negotiations and the execution of PAFs to provide missing essential terms of scope and price for each trade show, and the parties failed to identify any objective method for supplying those terms. Before rejecting an agreement as indefinite, a court must be satisfied that the agreement cannot be rendered reasonably certain by reference to an extrinsic standard that makes its meaning clear. Thus, where the parties have completed their negotiations of what they regard as essential elements, and performance has begun on the good faith understanding that agreement on the unsettled matters will follow, the court will find and enforce a contract even though the parties have expressly left these other elements for future negotiation and agreement, if some objective method of determination is available, independent of either party’s mere wish or desire. Such objective criteria may be found in the agreement itself, commercial practice or other usage and custom. Here, we conclude that the agreement itself and the parties’ prior practice as expressed in the incorporated PAFs for the two attended trade shows provide the objective criteria for determining the scope and price of the remaining work beyond the fixed costs associated with the future shows.

(Internal quotations and citations omitted).

Second Circuit Grants Late Petition for Interlocutory Appeal

On October 23, 2017, the Second Circuit issued a decision in Yu v. Hasaki Restaurant, Inc., Docket No. 17-1067, granting permission to file a late petition for an interlocutory appeal from a decision of the EDNY, explaining:

The relevant court of appeals may, in its discretion, permit an appeal from the order if application is made within ten days after entry of the order. Rule 5 of the Federal Rules of Appellate Procedure requires a request for permission to file a discretionary appeal to be filed within the time specified by the statute authorizing the appeal.

We acknowledge at the outset that time requirements for invoking appellate jurisdiction are strictly enforced. In Bowles v. Russell, 551 U.S. 205 (2007), for example, the Supreme Court ruled that a court of appeals lacked jurisdiction where a district court had mistakenly told an appellant that his notice of appeal could be filed within seventeen days, instead of the fourteen days specified in the relevant rule, FRAP 4(a)(6).

In the pending matter, Hasaki’s petition to appeal the District Court’s April 10 Order was filed beyond the ten days specified in section 1292(b). However, a notice of appeal was filed within that ten day period. The issue presented is whether the notice of appeal may be deemed the 7 functional equivalent of a section 1292(b) petition for purposes of invoking this Court’s jurisdiction over Hasaki’s petition.

In Casey v. Long Island R.R. Co., 406 F.3d 142, 146 (2d Cir. 2005), we ruled that a brief, filed within ten days of a District Court’s order, was the functional equivalent of a section 1292(b) petition. A brief is, of course, a far more informative document that a bare notice of appeal. But Casey permits us to determine whether, under the circumstances of this case, we should deem Hasaki’s notice of appeal, filed in the District Court, sufficient to invoke our appellate jurisdiction over the petition for an interlocutory appeal. That notice identified the Order for which review was sought. It also triggered the automatic electronic transmission to this Court of the notice of appeal and the District Court’s Order and Opinion. That Opinion fully informed us of the considerations relevant to whether the District Court’s Order was appropriate for a section 1292(b) appeal.

We thus knew, within ten days of the District Court’s Order, everything we needed to know in order to exercise our discretion whether to permit the interlocutory appeal. We note that the District Court’s Order required the parties to explain the justification for their settlement “[a]bsent a notice of appeal being filed within ten days, see 28 U.S.C. § 1292(b).” The citation was helpful, but the reference to a notice of appeal was not.

There is a reason why this Court should be somewhat indulgent in determining whether the notice of appeal should be considered the functional equivalent of a section 1292(b) petition. We are not asked to uphold appellate jurisdiction solely for the benefit of a litigant who has not prevailed after plenary proceedings in a district court. Here, the acceptance of appellate jurisdiction would achieve the objective of a conscientious district court judge who has determined, after a comprehensive analysis, that an interlocutory appeal will serve the interests of efficient judicial administration.

Under all the circumstances, we deem the timely filed notice of appeal sufficient to invoke our appellate jurisdiction over the section 1292(b) petition. Having accepted jurisdiction over the petition by virtue of the timely notice of appeal and timely receipt of related information, we grant Hasaki’s request to file his later filed formal section 1292(b) petition.

(Internal quotations and citations omitted). Having accepted the petition, the Second Circuit went on to grant leave to file an interlocutory appeal of the question of “whether Rule 68 settlements in FLSA cases require District Court review and approval.”