Client Q & A

Answers to common client questions.
Posted: February 23, 2015

Client Q&A: But if I tell you everything, then you will tell the judge!

But if I tell you everything, then you will tell the judge!

By John M. Lundin

As lawyers, we take seriously our many obligations to our clients. But our clients have a few obligations to us too, and they are just as critical to the success of a representation. One of those obligations is to answer our questions fully and with complete candor. One of the surest roads to defeat in a lawsuit is not giving your attorney the facts.

But, you might reasonably ask, if you tell us your darkest secrets, can’t your opponent make us disclose them to the court? The answer—with a few very narrow exceptions discussed below—is no. What you tell us in confidence, we keep in confidence.

General Rule: What You Tell Us in Confidence is Privileged

Generally speaking, what you tell your attorney in confidence must be kept that way. As the New York Statement of Client Rights puts it: “You have the right to privacy in your communications with your lawyer and to have your confidential information preserved by your lawyer to the extent required by law.” We call those communications privileged communications. As a general rule, privileged communications are protected from disclosure.

Moreover, even if what you tell us is not technically privileged, we have a broader duty to maintain client confidences.

The Communication Must be Confidential

Some important things to remember: for a communication to be privileged, it must be made in confidence. If you include people other than you and us in your communications, or if they are made in a way that is accessible to third parties (such as on a company email system), they may lose their privileged status. Relatedly—and this is something that sometimes trips people up—if the communication is confidential when you make it, but you later disclose it (by, for example, forwarding an e-mail from us to you on to a third party), it again may lose its privileged status. So, to maintain the privilege, keep your communications strictly between us and you.

The Communication Must Relate to Our Legal Representation

Sometimes, lawyers (including us) provide business advice to clients. In particular, it is common for in-house lawyers to be involved in business discussions. There may also be other connections between lawyers and their clients, and the information may be exchanged in various other contexts. You cannot assume that any discussion would be privileged simply because the person you are speaking to is a lawyer, or even your lawyer. If the communication is not related to legal advice, it is not privileged.

What About Other Advisors?

The attorney-client privilege can extend to non-attorneys who help us provide you with legal advice. So your communications with our paralegals or secretaries related to our representation would be covered in the same way as your communications with us. Likewise, if we talk to your accountant or bookkeeper to gather information that we need to represent you, those communications typically are considered privileged as well. However, the work of an accountant and bookkeeper generally is not privileged, even if they are providing you (as opposed to us) advice relating to a lawsuit.
Further, the work that accountants, bookkeepers, consultants or other advisers create at our request in anticipation of litigation is subject to a different kind of protection—the “work product” protection.

Evidence Sent to an Attorney

Information or documents do not become privileged simply because they were transmitted to a lawyer. For instance, if your accountant sends us a document reflecting a financial transaction, your accountant’s related comments to us may be privileged, but the document itself would not acquire privileged status if it was not privileged to begin with.

Narrow Exceptions to the Rule

The few and narrow situations in which we may be required to divulge confidential communications are specified by law. They are when necessary:

  • to prevent reasonably certain death or substantial bodily harm;
  • to prevent the client from committing a crime;
  • to withdraw a written or oral opinion or representation previously given by the lawyer and reasonably believed by the lawyer still to be relied upon by a third person, where the lawyer has discovered that the opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud;
  • to secure legal advice about compliance with the Rules of Professional Conduct or other law;
  • to defend the lawyer or the lawyer’s employees and associates against an accusation of wrongful conduct; or to establish or collect a fee.


There are many fine points and distinctions to the general rules discussed above, so when it comes to privilege issues, it is important to discuss the issue with us. That said, the general rule almost always applies: what you tell us in confidence, stays in confidence.

Posted: February 10, 2015

Client Q&A: I’m a shareholder in a small company and the other shareholders are not being fair to me. What can I do?

I’m a shareholder in a small company and the other shareholders are not being fair to me. What can I do?

By Bradley J. Nash


It is a familiar scenario: Three friends start a small business, each contributing capital and/or sweat equity to get the enterprise off the ground. They organize themselves as a corporation, but for the most part they operate informally. At first, everyone gets along, and the venture is a success. But with time, disputes arise. Maybe there are disagreements about the direction of the business. Or maybe personal or family conflicts spill over into the business relationship. The informal consensus that originally governed the business gives way to factions. Two of the original business partners align against the other – and because they hold a majority of the corporation’s shares, the two can impose their will on third, minority shareholder. As tensions worsen, the majority owners might start to abuse their control over corporate decision making to harm the minority owner – e.g., firing him as an employee or officer of the business, refusing to declare dividends to him, or even denying him access to information about the business. Although the beleaguered minority shareholder lacks the power on his own to stop these abuses, there may be a legal remedy.

Minority Shareholder Oppression

Minority shareholder oppression can take many forms. As commonly defined by the New York courts, shareholder oppression encompasses actions by those in control of a corporation that “substantially defeat shareholder expectations that, objectively viewed, were both reasonable under the circumstances and were central to the [shareholder’s] decision[] to join the venture.” Specific examples of oppressive conduct might include:

  • Firing the minority shareholder as an officer or employee of the company.
  • Removing the minority shareholder from the board of directors.
  • Refusing to declare dividends to the minority shareholder when the company is profitable.
  • Siphoning earnings to the majority shareholders – e.g., through excessive compensation, or entering into self-interested contracts with affiliates or family members.
  • Mergers or other transactions designed to dilute the minority shareholder’s ownership interest.
  • Cutting off the minority shareholder’s access to information about the business.

A pattern of conduct including any of the above (or similar unfair treatment) can be referred to as a “freeze out” (i.e., denying the minority owner the benefits of share ownership) or a “squeeze out” (i.e., attempting to force the minority owner out of the business altogether).

Available Remedies

In a minority shareholder oppression case, the court has broad power to fashion a remedy. By statute in New York, a minority owner who holds at least 20% of the voting stock of a non-public corporation can seek a court order dissolving the corporation, and distributing its assets to its creditors and owners. To obtain such a statutory dissolution, the minority shareholder must show either (1) that the controlling owners “have been guilty of illegal, fraudulent or oppressive actions” or (2) that “[t]he property or assets of the corporation are being looted, wasted, or diverted for non-corporate purposes.” If the majority owners willfully or recklessly dissipated the corporation’s assets, the court can remedy any prejudice to the minority by adjusting the owners’ stock valuations or imposing a “surcharge” on the wrongdoers. The court can also issue an injunction to stop the looting or dissipation of assets.

Holders of smaller interests, or of non-voting stock, who cannot bring a dissolution proceeding under the statute, may be able to seek dissolution under a judge-made (or, common law) rule. This common law dissolution claim, which is less well-defined, requires “egregious conduct” by the majority that “disqualifies” them from exercising control over the corporation and its shareholders.

Dissolution is considered a drastic remedy, and often the courts will order other relief short of dissolving the company. Most commonly, the majority owners can be directed to buy-out the minority shareholder’s interest at a fair value determined by the Court. In fact, in a statutory dissolution proceeding, the majority owners have the right, within 90-days of the filing of the proceeding, to elect to buy out the minority shareholder’s interest for the fair value (as determined by the Court) as of the day before the proceeding was commenced.

Different rules govern other business entities, such as limited liability companies and partnerships, which will be the subject of a separate post.


We have significant experience handling minority shareholder oppression claims and other disputes of all kinds among the owners of closely-held business entities. If you are an owner of a company that appears headed for a “business divorce,” we would be happy to advise you on a cost-effective strategy to preserve your rights.

Posted: January 26, 2015

Client Q&A: The contract I signed has an arbitration clause, does that mean I cannot file a lawsuit?

The contract I signed has an arbitration clause, does that mean I cannot file a lawsuit?

By John M. Lundin

In the past several decades, it has become increasingly common that business- and consumer-related contracts provide that a dispute over the contract has to be decided by one or more arbitrators–private persons chosen by the parties–rather than a court. Arbitration, when all goes well, can provide a way for parties to a contract to resolve their disputes quickly and relatively inexpensively.

General Rule: If You Agree to Arbitrate, You Have to Arbitrate

Generally speaking, if you have agreed to arbitrate a dispute, you give up the right to have a court decide it in a lawsuit. There are limits to this rule. If, for example, the parties to a contract with an arbitration provision nonetheless go ahead and litigate their dispute in court, a party may not be able later to demand that it be arbitrated instead.

Who Decides if You Have Agreed to Arbitrate?

In general, if the parties disagree whether a dispute should be arbitrated, they can ask a court to decide whether the contract requires them to arbitrate. Similarly, if a party brings a lawsuit on a contract with an arbitration clause, the other party can ask the court to stay the lawsuit and order the parties to arbitrate. It is not uncommon for arbitrations to start with either a lawsuit seeking to compel a party who has refused to arbitrate to do so or a motion to stay a pending lawsuit and direct the parties to arbitrate.

Do the Rules of Procedure Used By Courts Apply to Arbitrations?

Most commercial arbitrations are covered by federal law–the Federal Arbitration Act–because the act covers any dispute affecting interstate commerce. Decades of court decisions have interpreted “interstate commerce” very broadly to include most business transactions. For arbitrations not covered by the Federal Arbitration Act, there are state laws governing arbitration. While there are differences between federal law and the laws of the states, they tend to be very similar.

In general, there is no legal requirement that arbitrators follow federal or state rules of court procedure or evidence. However, many organizations that host arbitrations, such as the American Arbitration Association, have their own basic procedural rules that their arbitrators agree to follow. In addition, in practice, because arbitrators usually are lawyers, they and the parties’ lawyers often decide to follow basic court procedural and evidentiary rules in commercial arbitrations. However, they are not usually required to do so, and it does not normally invalidate the arbitration if they do not.

Still, arbitrations usually include a pre-hearing exchange of documents and a hearing at which the parties can present testimony and other evidence on their behalf. After considering the evidence and the parties’ arguments, the arbitrator (or arbitrators, because complex commercial cases often use more than one arbitrator) will issue a decision, called an award. Sometimes the award has a written explanation of the arbitrator’s factual findings and legal conclusions, just like a court’s decision. Sometimes, however, the award simply identifies the claims, who prevailed on them, and the amount of the damages awarded (if applicable). It is not unusual for the parties to agree to such a bare-bones award because it makes it harder to challenge the award, as discussed below.

Will a Court Review the Arbitrator’s Decision?

Under federal and New York law, you generally cannot appeal an arbitral award to a court the way you can appeal a trial court decision to an appellate court. Still, if you are unhappy with an arbitral award, you can ask a court to vacate it, which means that it is rendered without legal effect, as if it had never been rendered.

The standard for vacating an arbitral award is a high one, and most attempts to vacate awards fail. For awards covered by the Federal Arbitration Act (which, as discussed above, most business-related arbitrations are), courts generally will vacate an award only if you can show that (1) the award was “procured by corruption, fraud, or undue means”;(2) there was “evident partiality or corruption in” one of “the arbitrators”; (3) the arbitrators were “guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced”; (4) the arbitrators “exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made”; or that (5) the arbitrators exhibited a “manifest disregard” of the law. (Note that some courts do not recognize “manifest disregard” as a basis for vacating an award).

What should be apparent from this list is that it is not enough to show that the arbitrators got the law wrong or misconstrued a piece of evidence. Except for the “manifest disregard” basis, the grounds for vacating an award focus on improprieties in the arbitral process, not disputes over the law or interpretation of evidence.

If the Federal Arbitration Act does not govern the arbitration, you have to look to state law to determine what rules govern whether you can vacate an award. In general, state laws also set a high burden for vacating an award. For example, under New York law, an award can be vacated for (1) “corruption, fraud or misconduct in procuring the award”; (2) arbitrator “partiality” (3) the arbitrator “exceed[ing] his power or so imperfectly execut[ing] it that a final and definite award upon the subject matter submitted was not made”; or (4) the arbitrator’s failure to follow New York arbitral procedure. The New York standard is thus very similar to the federal standard.

Does that mean that there is no point in trying to get an arbitral award you think is wrong vacated? No. Judges sometimes find that one of these high standards has been met. But you have to be realistic about what constitutes grounds to vacate an award and should go into an arbitration assuming that you most likely will be stuck with the decision. In theory, this is one of the advantages of arbitration: eliminating the time, expense and uncertainty of appeals. (This theoretical advantage does not necessarily exist in practice when it comes to complex commercial disputes, which are commonly challenged notwithstanding the high threshold for overturning an arbitral award.)

How Do I Enforce an Arbitrator’s Decision

In New York, if you want an award to have the same legal effect as a court’s judgment–allowing you to use all of the judgment collection devices provided by New York law–you have to ask a court to “confirm” the award. Getting an award confirmed is supposed to be all but automatic once you make the application to have it confirmed.  However, as a practical matter, it is very common that when the winning party seeks to confirm the award, the losing party reflexively cross-moves to vacate the award on one of the grounds discussed above, resulting in at least some litigation.

Once a court confirms the award, you can enforce it just as if it were a court judgment, including garnishing the judgment debtor’s wages and attaching the judgment debtor’s property.


As you can see from even this general and high level discussion, there are a lot of issues to consider before deciding to agree to an arbitration clause in a contract or if you are required to arbitrate a dispute. We have extensive experience both in representing parties in arbitrations and in court proceedings relating to arbitrations. If you have questions regarding any of these issues, give us a call and we can go over your specific situation with you.

Posted: January 12, 2015

Client Q&A: We had an agreement, but . . .

We had an agreement, but . . .

By Vitali S. Rosenfeld

If lawyers had their way, every business transaction would be documented by a comprehensive written contract signed by everyone involved. But the reality is often different. Sometimes the parties discuss additional terms that are not included in the written agreement. Sometimes the parties exchange multiple emails and it is difficult to pinpoint what the final agreement is. And sometimes there is only an oral agreement. Is it legally binding? And if so, what are the terms?

When Must An Agreement Be In Writing?

There is no universal requirement that agreements be in writing to be legally enforceable. But there are numerous specific categories of agreements for which such a strict rule exists. The legislation prescribing such categories is commonly referred to as the Statute of Frauds.

Historically, the types of agreements covered by the Statute of Frauds were included on a piecemeal basis, so there is little consistency. For instance, New York law generally requires the following kinds of agreements to be in writing: real estate transactions; guarantees to pay another person’s debt; assignments of certain insurance policies; contracts to pay a commission or finder’s fee; and long-term contracts that, by their terms, cannot be performed within one year. These are just a few common examples, but by no means an exhaustive list. Some of these categories have exceptions: for instance, leases for less than six months are exempt from the general rule concerning real estate transactions, and some professionals (such as auctioneers, attorneys and real estate brokers) are exempt from the general rule concerning commissions and finder’s fees.

How Much of a Writing is Enough?

If an agreement falls within the Statute of Frauds, it has to be in writing – but that does not necessarily mean a formal contract drafted by lawyers. A letter, a memorandum, an email, even a note scribbled on a restaurant napkin may be enough – as long as it adequately states all the essential terms of the parties’ agreement and clearly expresses the parties’ intent to be bound. But the Statute of Frauds will not be satisfied if a material term of the agreement is missing – in other words, if the document reflects only the parties’ “agreement to agree” at a future time, rather than their consent to be bound as of the writing.

Do You Have an Alternative if a Contract is Unenforceable Under the Statute of Frauds?

If there is nothing at all to document a deal covered by the Statute of Frauds, then the agreement will likely be unenforceable. But that may not be the end of the story; sometimes, there is other recourse. For instance, the party providing goods or services in reliance upon a contract that fails under the Statute of Frauds may be able to recover the fair market value of such goods or services by making a claim for unjust enrichment or under another equitable theory. Of course, such recovery may be very different from the terms of the parties’ oral agreement, but that is the price of neglecting the Statute of Frauds.

Oral Agreements

On the other hand, agreements not covered by the Statute of Frauds may be oral. But is this a good idea? The terms of an oral argument are often difficult to prove, because the other side’s understanding or recollection of the agreed-upon terms may be significantly different from your own, and this problem will only get worse as time passes and the business relationship sours. (Remember that, by definition, the only agreements that need to be enforced in court are ones where the contracting parties are in conflict). You may need witnesses or other extrinsic evidence to compensate for that missing piece of paper. So, if an agreement is important to you, it is better to put it in writing.

What if a writing exists but you also have a separate oral agreement? That can be a problem, especially if the two are in some way inconsistent. Even where the transaction does not fall within the Statute of Frauds, the so-called parol evidence rule will preclude introduction of witness testimony concerning oral discussions to contradict the express terms of a written contract. Many contracts also contain some boilerplate variety of an “integration clause,” stating that the contract represents the entire agreement between the parties and that any oral agreements concerning the same subject matter are void. Another common clause would say that the contract cannot be changed orally and that any amendment must be in writing and signed by all parties (or at least by the party against whom it is being enforced). Such clauses make it more difficult to argue that the written contract was orally modified. Although common in day-to-day business, oral promises that certain contractual provisions will not be relied upon are usually unenforceable.

The Parol Evidence Rule

In any event, New York law requires that a written contract that is clear and unambiguous on its face must be construed in accordance with its plain language and express terms. To the extent the contractual language is ambiguous, however, the parties can use extrinsic evidence to clarify its meaning – and that is where contract negotiations and other oral communications will likely be considered.

Contracts Induced By Fraud

Of course, for these rules to apply, the written contract has to be valid to begin with. One way to challenge the validity of a contract is to assert fraudulent inducement – i.e. that you only entered into the contract because you were deceived by the other party’s intentional false statements (which could have been made orally). Again, the language of some contracts is designed to preclude that possibility by stating that, in entering into the agreement, the parties did not rely on any representations except those explicitly stated in the agreement. But again, for such clauses to apply, the contract needs to be valid – and if the whole contract was induced by fraud, it may be a nullity. This is where it gets tricky . . .

Course of conduct

Finally, it is important to remember that sometimes a contract may be modified by something more powerful than words – conduct. Courts have recognized that performance of contractual duties, or lack thereof, may be powerful indicators of the parties’ understanding and interpretation of the agreement, as well as of their intentions to abide by it, change it, or repudiate it.


While based on simple principles, contract law gets nuanced and quite complicated. If you have a contractual issue, be sure to consult with competent counsel. We have extensive experience in preparing and negotiating contracts for our clients as well as in resolving contractual disputes in litigation and arbitration.

Posted: December 29, 2014

Client Q&A: When is it Too Late to Sue?

When is it Too Late to Sue?

By John M. Lundin

If you wait too long to bring a lawsuit, you may lose the right to bring it. And if someone has waited too long to bring a lawsuit against you, you might be able to get the lawsuit dismissed.

How long is too long? It depends on the type of claim. Here are the basic rules.

Limitations Period

The law setting the time you have to bring a lawsuit is called the statute of limitations. Different statutes of limitation apply to different types of claims—personal injury, breach of contract, malpractice, discrimination—and the amount of time you can wait before bringing a particular claim varies a great deal. For example, you have:

  • One year to bring a claim for defamation;
  • Two years to bring a claim for wrongful death;
  • Two-and-a-half years to bring a claim for medical malpractice;
  • Three years to bring a claim for negligence, personal injury, legal malpractice, or injury to property;
  • Six years to bring a claim for breach of contract or fraud (the time to sue for fraud can change depending on when you discovered the fraud);
  • Twenty years to collect a judgment.

If you file your lawsuit after the statute of limitations has run—meaning that the specified time has elapsed—the claim may be time-barred and can be dismissed.

Accrual and Tolling

In New York, a lawsuit usually has to be filed before the statute of limitations runs out. However, this rule applies only if the defendant is timely served—generally, within 120 days of filing—and is served in accordance with law.

The more complicated question is when does the limitations period begin to run (or accrue). Just as the limitations period varies by type of claim, so do the rules on accrual. For example, a claim for breach of contract accrues when the contract is breached, even if the plaintiff does not suffer damages until later. On the other hand, certain personal injury claims do not accrue until the injury was, or should have been, discovered.

There also are several rules that stay the running of the limitations period—called tolling. Such rules cover situations where the plaintiff is unable to serve the defendant in New York, or where the plaintiff is not an adult or has died, or where the case was previously submitted to arbitration. In addition, courts can toll the statute of limitations if the defendant had a special duty to the plaintiff—like the duty a lawyer owes a client or a trustee owes the beneficiary of a trust—or takes action to hide the facts relating to the claim from the plaintiff. The limitations period can also be tolled by agreement of the parties.

Other Jurisdictions

Each state sets the statute of limitations for its own laws. And sometimes—but not always—federal law claims have statutes of limitations set by federal law. For that reason, statute of limitations concerns may affect where a lawsuit is brought.

Sometimes out-of-state plaintiffs try to take advantage of the differences in limitations periods by bringing claims arising under another state’s (or country’s) laws in New York. This usually does not work, because New York courts generally apply the shorter of the two statutes of limitations.


Whether a claim has been barred by the statute of limitations can be a very complicated. For each claim, you have to assess how long the limitations period is, when it accrued, and whether it was tolled. As experienced business litigators, a regular part of our practice is determining the answers to those questions. If you have questions regarding whether it is too late to bring a claim you think you may have against someone, give us a call.

Posted: December 13, 2014

Client Q&A: Should my lawsuit be in state or federal court?

Should my lawsuit be in state or federal court?

By Niall D. O’Murchadha

New York—like every state—has two parallel court systems, so if you want to file a lawsuit, one of the first questions to consider is whether the case should be brought in state or federal court. Similarly, if you have been sued, you should consider whether the case against you is in the right court, and whether you would get an advantage by moving the case from one system to the other. Each choice has its own advantages and disadvantages. Below, we summarize, at a simplified level, what those advantages and disadvantages are.

The State and Federal Court Systems

In the New York state court system, almost all cases are brought in the Supreme Court, which is the general trial court. Each county has its own Supreme Court—New York (i.e. Manhattan), Queens, Bronx, and so on. Appeals from Supreme Court decisions are brought to the Appellate Division, of which there are two in New York City: the First Department, sitting in Manhattan, which hears appeals from New York and Bronx counties, and the Second Department, sitting in Brooklyn, which hears appeals from Brooklyn, Queens, and Staten Island, as well as the Long Island counties and suburban counties up to Poughkeepsie. Appellate Division rulings can in turn be appealed to the New York Court of Appeals, New York’s highest court, sitting in Albany, although it is usually up to the Court of Appeals to decide whether it wants to hear the appeal or not.

In the federal system, the United States District Courts are the general trial courts, of which there are two in New York City: the United States District Court for the Southern District of New York, which covers New York and Bronx counties, as well as the suburbs up to Poughkeepsie, and the United States District Court for the Eastern District of New York, which covers the rest of New York City and Long Island. Appeals from the District Courts are heard by the United States Court of Appeals for the Second Circuit in Manhattan, and further appeals go to the United States Supreme Court in Washington, D.C., which decides in its discretion whether to take the case.

The New York state and federal courts systems have different judges, rules, and procedures, and often follow different legal precedents and standards.

Jurisdiction of the Federal Courts

A threshold question is whether your case can be brought in federal court at all. The federal courts have limited jurisdiction, and can only hear cases that reach beyond one particular state. This means that any case filed in federal court must either concern federal laws or the constitution (federal question jurisdiction), or involve a dispute between citizens of different states (diversity jurisdiction).

Federal question jurisdiction exists whenever the plaintiff alleges a claim arising under federal law, such as bankruptcy law, securities law, patent and other intellectual property law, federal anti-trust law, federal anti-discrimination law or civil rights law, constitutional law, immigration and citizenship law, or admiralty law. The initial complaint must allege claims under federal law—a defendant subsequently asserting federal counterclaims usually does not create federal question jurisdiction. Federal question jurisdiction also encompasses state law claims asserted along with federal law claims, so a plaintiff asserting both state and federal claims can file in federal court.

Some federal questions, such as bankruptcy, patent, admiralty, and federal securities cases, must be brought in federal court. Others can be heard in state court or in federal court.
Diversity jurisdiction exists when a lawsuit is between citizens of different states. Diversity jurisdiction requires complete diversity, so every defendant must be a citizen of a different state from every plaintiff. Corporations are citizens of both the state where they are incorporated and the state of their principal place of business, and partnerships and LLCs are citizens of every state of which their partners or members are citizens. (There are special rules for U.S. citizens living abroad, foreigners, and non-citizen permanent residents.) Diversity jurisdiction also requires that a minimum amount of money (the amount-in-controversy requirement) be in dispute, which is currently $75,000.

Even if a case is not filed in federal court, but could have been brought in federal court, the defendant can remove the case from state court to federal court (removal jurisdiction). So if the complaint alleges a federal law issue, or if there is complete diversity and the amount-in-controversy is satisfied, a defendant has 30 days from first receipt of the complaint to file papers and remove the case to federal court. All defendants must agree to remove the case, and a diversity jurisdiction case may not be removed if any defendant is a citizen of the state where the action is filed.

Considerations when Deciding Between Courts

If a plaintiff can choose between the state and federal system, or if a defendant can assert removal jurisdiction, many different considerations come into play, of which the following are only a few:

  1. Status of the parties. Over the years, the federal system has become increasingly pro-defendant, with District Court judges being required to follow precedents set by the conservative majority on the Supreme Court. For this reason, individual plaintiffs should consider staying in state court. For example, someone who wants to bring an employment discrimination claim or a consumer action or a personal injury case in New York City might well be better off in state court. Conversely, federal courts are more efficient at weeding out frivolous lawsuits, so a defendant facing a meritless claim, especially an outlandish one, should consider removing the case to federal court. Similar considerations would apply to an out-of-state business being sued by an individual New Yorker in state court.
  2. Availability of Commercial Division adjudication. Many of the New York Supreme Courts have set up specialized parts—known as the Commercial Divisions—to hear complex commercial cases. In our area, Commercial Divisions have been set up in Manhattan, Brooklyn, Queens, Westchester, and the Long Island counties. Just like federal court, Commercial Divisions have eligibility requirements; cases must either meet an amount-in-controversy requirement, which varies by county ($500,000 in Manhattan; $200,000 in Nassau County; $150,000 in Brooklyn; and $100,000 in Queens, Suffolk, and Westchester counties), or involve specific subject matters and also seek injunctive relief. Unlike federal judges, who are often former prosecutors rather than civil lawyers, and who hear all kinds of cases, including many criminal cases and other specialized federal-law cases, Commercial Division judges only hear commercial cases. For a large commercial dispute focused on state-law questions, the Commercial Division might be a better option than the federal courts.
  3. Favorable interpretation of state law questions. Federal courts can hear both federal law and New York state law claims, but federal courts and state courts often apply state law differently. A party considering whether to bring state-law claims in federal court should research whether state or federal courts apply the applicable legal doctrines in the same way, and if they do not, decide which court would be more favorable to that party’s position.
  4. Procedural efficiency. Many commentators—including many state court judges—complain that the state court system is underfunded compared to the federal system, that state court judges have fewer staff members but more cases, and that the state court system is slower to implement procedural improvements, such as electronic filing of documents. Efforts at reform spearheaded by successive Chief Judges of the Court of Appeals have led to some improvements—such as the creation of the more up-to-date Commercial Division—but many of their other proposed reforms have not been implemented. State court litigants who are not in the Commercial Division may face inefficiencies such as judges without access to email or electronic filing, unnecessary court appearances, and different parts of the same case being supervised by different judges. These problems can increase expenses and frustrate clients, especially those who are litigating on a limited budget.
  5. Availability of immediate appeals. A big difference between state court procedure and federal procedure is the availability of immediate appeals, known as interlocutory appeals. In federal court, an appeal can generally only be taken from a ruling which disposes of the entire action, but in state court most rulings can be appealed to the Appellate Division immediately. This means that, in federal court, an erroneous ruling denying a motion to dismiss or a motion for summary judgment, or erroneously dismissing some claims but not others, may be unappealable for years, until the rest of the case has been decided. This is a double-edged sword; a state-court party can use interlocutory appeal to fix mistakes quickly, allowing the case to move forward steadily and decreasing the likelihood that an early mistake will force large parts of the case to be re-litigated, but a well-financed party can also delay any final judgment and increase costs by appealing every interim order.
  6. Change of venue. Because the federal system covers the entire country, it is much easier to move a federal case out of New York to another part of the country. New York state courts cannot transfer a case out of state, they must instead dismiss the case so that the plaintiff can re-file elsewhere, and a defendant seeking such an outcome must meet a far higher burden, as well as facing uncertainty as to where, exactly, the plaintiff will eventually recommence the action. A non-New York defendant who believes that a case would be better heard in another state—if, say, the principal witnesses or documents are located outside New York—should consider removing the case to federal court and then moving for a change of venue.


The decision whether to proceed in state or federal court is a complicated one—in most cases, several of the factors listed above will have to be considered and weighed against one another—and can influence the outcome of the entire case. We have substantial experience in both the New York State courts and in the United States District Courts and can help you decide if you are in the right court—and, if you have a choice, which court is best for you and your case.

Posted: December 1, 2014

Client Q & A: How do I make sure my confidential information is protected during litigation?

How do I make sure my confidential information is protected during litigation?

By Erik S. Groothuis

The discovery process in modern litigation is very broad—all documents potentially relevant to the disputed issues are in play. That means that in almost every commercial case it is possible that sensitive, proprietary, or otherwise confidential information will have to be turned over to your adversary. Often, that adversary is also a competitor. In those situations, you can usually obtain a court order, called a “protective order,” that protects against the unauthorized disclosure of such information. Litigants often agree that a protective order should be in place and ask the court to issue one. But if your opponent will not agree, you can still make a motion to the court to ask for one. Because a protective order is an order signed by a judge, it is binding on the parties and a party that breaches it can be held in contempt.

Protective orders are very common in commercial litigation. Typically, they prohibit disclosure of confidential information, whether produced in written (documentary) or oral (testimony) form, to anyone other than:

  • The parties to the action
  • Counsel to the parties, including paralegals and staff
  • The court
  • Vendors assisting counsel (copying, graphics, electronic document hosting, etc.)
  • Experts (consulting and testifying)
  • Stenographers
  • Witnesses who must be shown confidential information while testifying

If your litigation adversary is a business competitor, and the information disclosed could be used by your adversary to compete against you, protective orders can also have a heightened “attorneys’ eyes only” level of protection. “Attorneys’ eyes only” documents or testimony cannot be shown to anyone working for the adverse party who might be able to make use of the information for ongoing business.

Of course, a party is free to make whatever use it chooses of its own confidential information—protective orders restrict what your adversary does with your information, and what you do with theirs, not what anyone does with their own information.

When documents are covered by a protective order, they should be labeled “Confidential” (or a similar designation) in case they fall into the wrong hands. If such documents are filed publicly, they are typically filed under seal so that only the court can access them. Where feasible, documents that contain snippets of confidential information can be redacted and then filed with the clerk for public access so that only the confidential information is removed. Caution should be taken when deciding what information to designate as “Confidential” because some judges will scrutinize designations and do not look favorably on the practice of designating everything that is turned over to the other side as confidential. Also, the legal standard for filing documents under seal is different in New York state courts than it is in federal courts. So, the court you are in may make a difference in how easy it is to protect confidential business information. (And note that there are specific rules that apply in New York state court to the protection of confidential personal information, such as social security numbers, even if there is not a protective order in place.)

Protective orders typically have provisions whereby third parties who are called upon to produce evidence (see our prior Client Q&A on this topic) may designate their information as confidential. This mechanism can anticipate and overcome a common objection from subpoena recipients.

Care should be taken to lay out the consequences of a violation of a protective order in advance. It can be difficult, if not impossible, to quantify the damages associated with the improper disclosure of confidential information, so protective orders should specify the remedies for breach. Such remedies can include injunctive (non-monetary) relief.

At the end of a litigation, whether by settlement or judgment, a protective order should provide that all protected information must either be returned to the producing party or destroyed. Because litigants and attorneys can forget, proper follow-up is important to make sure all protected documents in the adversary’s files have been disposed of.
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While protective orders are commonplace, there are a number of pitfalls for the unwary. The last thing you want is to have satellite litigation over the improper use or disclosure of sensitive commercial data turned over in discovery, whether you are on the prosecuting or receiving end of the claim. We have extensive experience litigating and negotiating protective orders. Please reach out with questions.

Posted: November 17, 2014

Client Q & A: Why am I in a Lawsuit in New York?

Why am I in a lawsuit in New York?

By Vitali Rosenfeld.

If you get sued, one of the first questions to ask yourself is whether you are being sued in the right place. A lot of commercial lawsuits involving out-of-state parties are filed in New York for various reasons – but not always are there legitimate grounds for a New York court to exercise judicial authority over all defendants. Such authority, referred to as “personal jurisdiction,” is a prerequisite for any civil lawsuit. Does the court have personal jurisdiction over you or your business?

General Jurisdiction

Where a party’s contacts with New York are so strong that it may be considered essentially at home in this state, New York courts (both state and federal) may exercise so-called “general jurisdiction,” i.e. jurisdiction that covers any and all claims against that party. That will normally be the case with an individual who lives in New York, or a company that has its primary place of business in New York.

General jurisdiction can also be based on more attenuated contacts: for instance, a company may be incorporated in Delaware and have its main office in New Jersey, but nevertheless do continuous and systematic business in New York. The general jurisdiction analysis may include such inquiries as whether the party has an office or employees in the state, whether it solicits or conducts business in the state, and whether it has bank accounts, real estate or other property in the state.

Specific Jurisdiction

Where a party’s contacts with New York are insufficient to establish general jurisdiction, it may still be subject to “specific jurisdiction” – which means that the court may exercise its authority over such defendant only with regard to the subject matter of a specific dispute. By definition, the defendant’s contacts with New York that give rise to specific jurisdiction must be related to the events giving rise to the plaintiff’s claim.

For instance, if a foreigner comes to New York and commits some wrongdoing here, he may be sued in New York for the damages caused by that specific wrongful conduct. Likewise, a foreign business may be sued in New York for damages arising from its ownership of real property in this state. But in both examples, the court’s jurisdiction will be limited to the particular claims with a New York nexus, and the non-resident defendant should be able to resist a plaintiff’s attempt to include other claims, for which such a nexus is lacking. There are particular rules for establishing specific jurisdiction depending on the type of claims involved; for some claims, the inquiries are more nuanced and complex than for others.

Forum Selection Clauses

One of the most common grounds for specific personal jurisdiction in commercial matters is a contractual provision in which the parties consented in advance to jurisdiction of a particular court or courts of a particular state. Such a provision is commonly referred to as a forum selection clause. New York courts usually give effect to such provisions, under the principles that the parties are in the best position to determine where they would want to litigate a potential dispute and that enforcement of forum selection clauses provides certainty and predictability, especially in international cases. Indeed, there is a statute precluding a New York court from declining jurisdiction in high-stakes commercial disputes even where the parties’ only connection to New York is the forum selection clause in their agreement.

There are exceptions, however. As any other contractual provision, a forum selection clause may be invalidated if it is found to have been procured by fraud, contrary of public policy, or otherwise unreasonable or unjust.

It is also important to distinguish between exclusive and non-exclusive forum selection. In the first scenario, the parties agree that any dispute arising from their contract may be litigated only in a particular forum; in the second, they consent to a certain forum’s jurisdiction without ruling out the possibility of litigating elsewhere. Suppose that a plaintiff files his contractual claims in New York, even though the agreement contemplates jurisdiction of foreign courts. If the forum selection clause is exclusive, the defendant will have a much better argument for dismissal of the New York action than with a non-exclusive forum selection clause.

But where the forum selection clause is found to govern, there are further questions. Does it cover all of plaintiff’s claims, and does it apply to all defendants? A plaintiff who wants to sue in New York will rely on a forum selection clause in favor of New York courts, but may try to include claims that are extraneous to the contract and to name defendants who did not sign it, such as the contracting party’s affiliates or executives. A lot of care should be exercised in interpreting forum selection clauses and determining their proper scope. Of course, it is better to pay careful attention to such clauses when signing a contract, to ensure that there are no jurisdictional surprises down the road – in other words, that you do not suddenly find yourself required to litigate in a state or country with which you have no connection.

What to Do if You are Sued in New York

Once you are sued in New York, however, the important thing is to determine whether you have a jurisdictional defense before you make any court appearance or filing – because such a defense may be easily waived if it is not timely and properly raised. For that reason, you should consult with competent counsel as soon as you are served. We have extensive experience in analyzing jurisdictional issues and effectively asserting jurisdictional defenses on behalf of individual and corporate clients.

Posted: November 3, 2014

Client Q & A: I’ve Been Served With a Subpoena. Now What?

I’ve been served with a subpoena. Now what?

By Erik S. Groothuis.

When parties to civil a lawsuit need evidence from non-parties to support their claims or defenses, they may issue subpoenas to obtain such evidence. These subpoenas are often personally served by process servers in the same way that complaints initiating lawsuits get served.

Generally speaking, there are two types of subpoenas: (1) a subpoena seeking documents (typically referred to as a “subpoena duces tecum” from the Latin); and (2) a subpoena seeking testimony (typically referred to as a “subpoena ad testificandum,” again from the Latin). These may be combined, such that a single subpoena can seek both documents and oral testimony. In that circumstance, the issuing party typically wants the documents at the same time as, if not in advance of, the oral testimony.

If you are served with a subpoena, it is important to keep track of timing. The date on which you are served starts the clock with respect to your time to respond or object to the subpoena.

No one wants to expend the time and effort needed to respond to a subpoena, but they have the force of a court order, so you cannot ignore one.


When you receive a subpoena seeking oral testimony, you should first check to see if the subpoena commands you to appear in court for a trial or other evidentiary hearing, or for deposition testimony before trial (sometimes referred to as an “examination before trial” or “EBT” in New York State courts). If the latter, you will probably be summoned to appear in a lawyer’s office, where you must respond to questions from the parties’ attorneys before a court stenographer. Keep in mind that you may not have to testify on the date and time specified in the subpoena; if you have other commitments, you should reach out to the attorney issuing the subpoena to see if the date is flexible. You will also be entitled to a nominal witness fee.


If the subpoena seeks documents, it must specify what documents are sought with reasonable particularity. You have the right to raise objections to the subpoena, such as, for example, if the subpoena is overbroad, unduly burdensome, seeks privileged materials, or is otherwise improper. Objections must be served within the time frame specified on the subpoena, typically in 20 to 30 days. You should keep track of the expenses you incur in responding to subpoenas. It is often the case—particularly in New York State courts—that the party issuing the subpoena must reimburse or defray such costs, which can include copying and document collection fees, the value of the time spent for personnel to collect documents, and even possibly attorneys’ fees if you hire counsel to represent you. If the subpoena is delivered to a business or organization with many people or branches, it is important that all relevant personnel be told about the subpoena so that documents that are potentially responsive to it can be preserved. It is best to do this in writing, in the form of a “litigation hold” memorandum. Any automatic deletion or document shredding/destruction policies must be suspended for the documents called for in the subpoena. Last, if the subpoena seeks business records, you may be asked to provide an affidavit authenticating them as records generated in the ordinary course of the business.

Quashing a Subpoena

If you think that the subpoena was sent to harass you or for some other improper purpose, you have the right to ask the court to “quash” the subpoena. This would require you to file a motion asking the court to grant you that relief. In the first instance, you should raise your concerns with the issuing party (while making sure to preserve your right to raise written objections within the time frame for a response) in an attempt to work it out before asking for court intervention. Quite often, you can agree to narrow the scope of the subpoena as a reasonable compromise.

If the subpoena seeks sensitive, confidential, or proprietary information, it is often possible to ensure such information is produced subject to a court-approved “protective order,” which requires the parties to keep your information confidential and not file it in a publicly-accessible way.

What to Do If You Are Served With a Subpoena

It can be stressful when a process server shows up at your home or business to serve you with papers. The good news is that if those papers are a subpoena, it means that you are not a party to a lawsuit and that you are just being asked by one of the parties to provide evidence. Since there are many pitfalls involved in responding to subpoenas—especially because sometimes parties use subpoenas to see if they may have a claim against the non-party—you should consult with counsel as soon as you are served. We are very experienced in helping individuals and businesses that have been served with subpoenas respond in a way that efficiently and effectively protects their right not to be subject to unfairly burdensome demands yet makes sure that they do not get themselves in trouble by not properly responding.

Posted: October 20, 2014

Client Q & A: Why Do I Have To Give Evidence To My Opponent?

We have been blogging on recent developments in the Commercial Division for over a year now–over 430 posts. Our posts normally focus on the legal aspects of court decisions in commercial litigation. This post marks the beginning of a different kind of post here: one directed to clients rather than other commercial litigators.

We are calling these new posts Client Q & A’s, because they are written in the form of answers to questions we get from non-lawyer clients. Our introductory post is entitled Why Do I Have To Give Evidence To My Opponent?

Why Do I Have To Give Evidence To My Opponent?

By John M. Lundin.

One of the things often overlooked about civil litigation in the United States is that, if you are in a lawsuit, you likely will have to give evidence to your opponent, including evidence that it can use against you at trial. In big lawsuits, this exchange of evidence—usually called discovery—can be the most expensive part of the lawsuit. Here are some key things to know about a litigant’s obligations to give discovery before trial.

Document Demands

Normally, each party in a lawsuit gets to demand that the other parties turn over documents relating to the lawsuit. These requests, usually called document demands or document requests, can be very broad. The standard for what must be turned over varies from state to state and between the states and the federal courts, but usually an opponent can ask for anything relevant to the case, or sometimes even anything that could lead to the discovery of relevant evidence, even if the documents themselves are not relevant. And, the documents you will have to produce are not just paper stored in a filing cabinet, but also include evidence stored in electronic form, such as word processing files, databases and e-mails. You might also be called upon to produce documents held by others if you have the right to obtain and produce them, such as bank records, documents exchanged with your accountant, or documents you previously provided to a lawyer.

Finding and producing all these documents can, in a large case, be very expensive and time consuming. But it has to be done. Courts do not look kindly at litigants who fail or refuse to provide discovery, and no matter how bad you think the evidence is for you, it almost certainly is not as bad as what will happen if the court finds out that you had it and did not produce it.

Of course, this does not mean that you have to give up anything your opponent asks for no matter the cost. Courts are willing to limit discovery if the importance of the evidence is outweighed by the cost of finding and producing it. There also are procedures for protecting the confidentiality of sensitive evidence, such as trade secrets or business plans. And some categories of documents, such as your communications with your lawyers, generally are protected by privilege and do not have to be produced at all.


In addition to producing documents, you might have to give written responses to questions called interrogatories. Very generally, interrogatories have to be questions to which there is a relatively short answer, although you might also have to provide relevant data, such as sales data. As with document productions, courts are willing to limit the scope of interrogatories if they are inappropriate or too burdensome. Some courts also limit the number and type of allowed interrogatories in their local rules.


Normally, the parties to a civil lawsuit have the right to depose each other. In a deposition, a witness is asked questions under oath by their opponent’s attorney. The testimony normally is recorded by a person called a court reporter, who prepares a written transcript of the testimony. In general, if you are deposed, you will have to answer any question put to you unless it asks for confidential communications between you and your attorney, but there are some other minor exceptions. In federal court, the default rule is that each person can be deposed for no more than one day of seven hours, but courts will for good reason allow longer depositions. State court rules vary; some allow multiple days of depositions. However, the amount of time a deposition can go will be limited by the court to what it considers reasonable given the circumstances.

Non-Party Discovery

Not only can the parties to a lawsuit gather evidence from each other, their lawyers normally also can serve subpoenas on people and businesses that are not parties to the lawsuit to get relevant documents and to get deposition testimony.


Discovery can add significantly to the time and expense of litigation, which can be frustrating, but it also means that, by the time you get to trial, the material facts of a case normally will all be on the table. This is one of the reasons most civil cases do not go to trial. Once all the evidence is out, it usually is possible to anticipate the odds of success at trial, leading to settlement or, if the relevant facts all point in favor of one opponent or the other, to a decision by the court without a trial.

A big part of our job as business litigators is managing the discovery process to make sure that it is no more burdensome on you (or expensive) than necessary and at the same time making sure that we get the evidence you need from your adversary and others to prove your claim or defense. We do this through application not just of our knowledge of the law of discovery, but also through our experience with project management and our technical skills in managing both the process of collecting electronic records from your files (documents on your computers or central servers and e-mail) and using the sophisticated electronic databases that manage and analyze large collections of evidence.