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Posted: January 26, 2014

How Not to Get a Case Assigned to the Commercial Division

On January 23, 2014, the First Department issued a decision in BDO USA, LLP v. Phoenix Four, Inc., 2014 NY Slip Op. 00410, illustrating the wrong way to get a case assigned to the Commercial Division.

In this post, we focus on just one aspect of the BDO USA decision, plaintiff’s attempts to assign the action to the Commercial Division. The First Department explained:

[The plaintiff] commenced this action against [the defendants], asserting claims for breach of contract and promissory estoppel. . . Following [the plaintiff’s] filing of the complaint, [the defendants] requested an extension of time to respond, and the parties agreed to a December 24, 2012 response date. However, on December 21, 2012, [the defendants] separately moved to dismiss the complaint under CPLR 3211(a)(1) and (a)(7). [The plaintiff] also filed and served an RJI on the same day. The action was assigned to a non-Commercial Division part.

By letter dated January 3, 2013, [the plaintiff] requested that Supreme Court transfer the action to a Commercial Division part under 22 NYCRR § 202.70. In opposition, [the defendants] argued that [the plaintiff’s] request was untimely under 22 NYCRR § 202.70(e) because [it] had submitted the request more than 10 days after it had received the RJI on December 21, 2012. . . . The Administrative Judge denied [the plaintiff’s] request as untimely, noting that the 10-day time limit under 22 NYCRR § 202.70(e) is strictly construed.

[The plaintiff] then served a notice of voluntary discontinuance without prejudice under CPLR 3217(a)(1). . . . At the same time, [the plaintiff] initiated a new action in Supreme Court . . . and submitted a complaint that is essentially identical to the complaint in this action. [The plaintiff] intended to seek to have the new action transferred to a Commercial Division part once defendants re-filed their motions to dismiss.

In response to [the plaintiff’s] notice of discontinuance, [the defendants] moved under CPLR 3217(b) for an order discontinuing the action with prejudice. Both defendants argued that the motion court should deem [the plaintiff’s] notice with prejudice, because [it] filed the discontinuance for the sole purpose of circumventing the Administrative Judge’s final and non-appealable order. Defendants further argued that the notice of voluntary discontinuance was untimely under CPLR 3217(a)(1) because [the plaintiff] served it after defendants had filed a responsive pleading – that is, their motions to dismiss. Defendants sought, in the alternative, an order deeming [the plaintiff’s] notice of voluntary discontinuance a nullity.

The First Department held that the plaintiff’s notice of discontinuance “was untimely because [it] served it after defendants filed their motions to dismiss” and thus its “notice was ineffective and a nullity, and the motion court should not have deemed defendants’ motions withdrawn.”  That the plaintiff “served its notice of discontinuance in an attempt to circumvent the Administrative Judge’s order denying its request to have its action assigned to the Commercial Division may be a valid basis for granting a discontinuance with prejudice.”

The First Department gave the plaintiff some relief–it remanded to the trial court to consider the motions to dismiss. However, it seems to us that the plaintiff could have avoided all of the trials and tribulations described above simply by filing an RJI to have the action assigned to the Commercial Division as soon as it filed the complaint. There is no rule requiring a party to wait until an answer or motion to dismiss is filed to seek assignment to the Commercial Division. Indeed, it is often helpful to know at the very beginning of an action which justice it is assigned to.

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