Could the Court of Appeals Overrule its Jurisdictional Barrier to Review of Unpreserved Questions of Law Reached and Decided by the Appellate Division?

Wednesday at the Court of Appeals’ oral arguments, a fascinating, albeit super nerdy, procedural issue came up in Moore Charitable Foundation v PJT Partners. At the end of the appellant’s argument time, Judge Garcia asked a simple, unassuming question that likely would have been missed by most everyone watching. He asked the appellant, “Don’t you have a Hecker problem?” What Judge Garcia was asking, as he explained to counsel, does the Court of Appeals have jurisdiction to consider an issue that has been raised and decided by the Appellate Division in its interests of justice jurisdiction or under an exception to the normal preservation requirement?

In Moore, a case alleging negligent supervision of an employee who committed fraud on a potential investor, the First Department upheld the dismissal of the negligent supervision claim for failure to state a claim because the complaint did not allege that the employer was aware of facts that would have shown the employee’s criminal propensities (see Moore Charitable Foundation v PJT Partners, 178 AD3d 433 [1st Dept 2019]). Alternatively, the Appellate Division held that the complaint failed to allege that the plaintiff was a customer of the employer, an argument that was not raised until reply on the defendant’s motion to dismiss and and was not decided at Supreme Court. The Appellate Division reached and decided the customer issue because “it is a question of law that can be resolved on the face of the existing record,” an exception to the preservation requirement. Now on appeal at the Court of Appeals, both parties have argued that the Court should decide the issue that the Appellate Division held that it could reach under an exception to preservation, but neither briefed whether the Court of Appeals has jurisdiction to entertain it.

This unique situation presents the Court of Appeals with the opportunity to reconsider, as Judge Robert Smith suggested in Hecker v State of New York (20 NY3d 1087, 1088-1089 [2013] [R.S. Smith, J., concurring]), the rule that it may not review unpreserved questions of law even if, as here, the Appellate Division decided the matter solely on the unpreserved ground. As the majority noted in Hecker, the Court generally lacks “power to review either the Appellate Division’s exercise of its discretion to reach [an unpreserved] issue, or the issue itself” (id. at 1087; see also Feinberg v Saks & Co., 56 NY2d 206, 210-211 [1982] [“Although the order of the Appellate Division states that the reversal was on the law, it is clear that, in reaching the unpreserved legal issue as to whether the verdicts were inconsistent, the Appellate Division exercised its broad discretionary powers of review. The subsequent reversal by the Appellate Division makes the order of that court appealable to this court. The legal issue presented, however, is not subject to our review as defendants during trial failed to make a timely objection to preserve it for our review. This court has no power to review either the unpreserved error or the Appellate Division’s exercise of discretion in reaching that issue.”]).

Applying this rule in Hecker, the Court refused to reach the merits of the unpreserved question on which the Appellate Division granted judgment to the State solely because the State failed to preserve the question at Supreme Court (see Hecker, 20 NY3d at 1087). Although Judge Smith concurred in the majority’s refusal to reach the merits of the unpreserved question because he was constrained by precedent to do so, he explained that the Court’s “rule is a bad one, and that we should be prepared to reconsider it in a future case” (id. at 1088 [R.S. Smith, J., concurring]).

As Judge Smith aptly noted, the Court’s rule precluding review of the merits of an unpreserved issue of law, in a civil case, “does not make sense, and sometimes—as in this case—rewards a party for failing to preserve a legal issue” (id.). Judge Smith reasoned:

The question of the applicability of 12 NYCRR 23–1.7(d) to the area where plaintiff suffered his injuries is an issue of law of the sort that CPLR 5501(b) authorizes us to review. The Appellate Division’s unreviewable, discretionary choice to reach the issue does not make the issue itself any less one of law. Nor can I imagine any common sense reason why, if the Appellate Division erred in deciding that issue, we should be powerless to correct the error. None of the cases cited in the memorandum opinion, and no other authority of which I am aware, offers any justification, either in statutory language or in policy, for the conclusion that a legal issue in a civil case is made unreviewable here by the failure to preserve it in the trial court, even when the Appellate Division has chosen to review it.

That conclusion is, no doubt, thought to be a corollary of the fiction that we are jurisdictionally barred from reviewing unpreserved issues—a fiction that, as I have explained elsewhere, we have occasionally stated but do not adhere to with any consistency. The underlying assumption seems to be that unpreserved questions of law are not questions of law at all, but I have found no civil case in which we have made that assumption explicit. We have occasionally said in criminal cases that unpreserved issues are not issues of law—a misreading, as Judge Pigott explained in a recent dissenting opinion, of a statute limited to criminal cases, CPL 470.05(2). In the civil area, there is not even a misread statute to support the notion that unpreserved issues are somehow not “legal” ones.

Whatever its rationale may be, the rule we follow today produces a bizarre result. It was defendant, the State of New York, that failed to preserve the section 23–1.7(d) issue. The Appellate Division, exercising its discretion to forgive defendant’s oversight, reached the question anyway, decided that the section did not apply, and dismissed the claim. And now in this Court, claimant loses the case—whether he is right or wrong on the merits—because of defendant’s neglect. This result is so counterintuitive—and the cases that we find to compel that result so little known—that the parties not only failed to anticipate it, but assumed the rule to be the opposite. The preservation question is hardly mentioned in the briefs, but when it was raised in oral argument, defendant asserted that the issue was preserved, and claimant said that it was not—i.e., each party took the position that was to the advantage of the other. Counsel will understandably scratch their heads when they read today’s decision

(id. at 1088-1089).

The problem is, just like in Hecker, the parties did not squarely present the preservation question to the Court of Appeals. Neither party briefed it, and both at argument just assumed that the Court has jurisdiction to review anything that the Appellate Division does, even when it acts under its interests of justice jurisdiction. That’s not the case, however.

Nonetheless, Judge Smith’s words in Hecker ring true. This is a trap for the unwary and an inequity that the Court should revisit. Fail to recognize the jurisdictional issue on appeal to the Court of Appeals, and you could face the same situation that the parties in Moore now do. The Court of Appeals could decline to exercise jurisdiction over an “unpreserved” issue that the Appellate Division reached and decided against you.

So, while this case may not be the right opportunity for the Court to reconsider its rule precluding the review of unpreserved questions of law in the limited circumstances presented here, where, in a civil case, the Appellate Division has exercised its interests of justice jurisdiction to reach the unpreserved question and decided the case on the unpreserved ground in favor of the party that failed to preserve the issue, that time is long overdue. The Court’s own jurisdictional rules should not prevent review of what is indisputably a question of law in the limited circumstance where the Appellate Division decided to reach and determine an unpreserved issue in favor of the party that failed to preserve it.

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