Court of Appeals Leave Grants: January Session through June Decision Days

The second half of the Court of Appeals’ 2019-2020 term was certainly eventful, with the pandemic looming largest of all. In mid-March, New York shut down in response to COVID-19 and the Court of Appeals shut down with it. Arguments that were scheduled for the spring argument terms were either held virtually, rescheduled, or submitted on the briefs. And the Court’s decisions to grant leave to appeal in new cases took a hit too. Here’s a quick look at the new cases in which the Court of Appeals granted leave, from the beginning of the January Session to the end of June Decision Days last month.

January Session

Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v Matthew Bender & Company, Inc., 172 AD3d 405 (1st Dept 2019)

Issue presented: May a consumer state a cause of action under General Business Law § 349 where the only injury alleged to have resulted from the defendant’s allegedly deceptive business practices is the amount that the consumer paid for the product?

Holding below: Supreme Court, New York County, granted the defendant’s motion to dismiss the complaint because the increased price of a product is not a cognizable injury under section 349. The Appellate Division, First Department affirmed.

February Session

Ditech Financial, LLC v Naidu, 175 AD3d 1387 (2d Dept 2019)

Issue presented: Does a mortgage holder’s execution of a stipulation to discontinue a prior foreclosure action constitute an affirmative act to revoke the holder’s election to accelerate the mortgage, and thereby render a subsequent foreclosure action timely?

Holding below: Supreme Court, Queens County, denied the motion of defendant Naidu to dismiss the complaint insofar as asserted against him as time-barred and granted those branches of the plaintiff’s cross motion for summary judgment on the complaint insofar as asserted against defendant Naidu and for an order of reference. The Appellate Division, Second Department, however, reversed the orders, granted the motion of defendant Naidu to dismiss the complaint insofar as asserted against him as time-barred, and denied as academic those branches of plaintiff’s cross motion for summary judgment on the complaint as asserted against defendant Naidu and for an order of reference. The Second Department held that the stipulation to discontinue the prior foreclosure action did not affirmatively revoke the acceleration of the mortgage because it “was silent on the issue of the revocation of the election to accelerate, and did not otherwise indicate that the plaintiff would accept installment payments from the [defendant].”

Vargas v Deutsche Bank National Trust Company, 168 AD3d 630 (1st Dept 2019)

Issue presented: Did a letter from the mortgage holder’s predecessor-in-interest, which informed the plaintiff that the mortgage debt would be accelerated if he failed to cure his default, accelerate the loan balance and commence the statute of limitations for a foreclosure action, and whether the discontinuance of a prior foreclosure action a sufficient affirmative act to revoke the acceleration?

Holding below: Supreme Court, New York County, upon renewal, denied mortgage holder’s motion to dismiss the complaint and granted the plaintiff’s cross motion for summary judgment declaring plaintiff’s property free and clear of all liens and encumbrances by defendant. The Appellate Division, First Department affirmed, holding that the mortgage holder “was time-barred from commencing a foreclosure action against plaintiff’s mortgaged property because more than six years had passed from the date that the debt on the mortgage was accelerated.” The letter showed a clear intent to accelerate the debt if not satisfied within a time certain, and the plaintiff did not cure the default.

Jean-Paul v 67-30 Dartmouth St. Owners Corp., 174 AD3d 870 (2d Dept 2019)

Issue presented: Does the dismissal of a Chapter 7 bankruptcy proceeding restore a debtor-plaintiff’s capacity or standing to pursue a personal injury action that the debtor-plaintiff failed to list as an asset during the bankruptcy proceeding?

Holding below: Supreme Court, Queens County, among other things, granted that branch of defendant’s motion which was for summary judgment dismissing the complaint because the failure of the debtor deprived her of capacity to pursue the personal injury action. The Appellate Division, Second Department affirmed.

Nunez v Nunez, 175 AD3d 1160 (1st Dept 2019)

Issue presented: Did a triable issue of fact exist as to the fault of the defendant driver when the car he was driving was struck in the right rear tire, causing the accident?

Holding below: Supreme Court, New York County, denied the motion of defendants Danny Budden, Clark Road Transport, Inc. and Ryder Truck Rental Canada for summary judgment dismissing the complaint as against them. The Appellate Division, First Department reversed and granted the motion for summary judgment, holding that photographic evidence demonstrated that they could not have been at fault. One Justice dissented, and would have held that triable issues of fact existed as to the parties’ respective liabilities.

March Session

J.P. Morgan Securities, Inc. v Vigilant Insurance Company, 166 AD3d 1 (1st Dept 2018)

Issue presented: Was the disgorgement payment made to the Securities and Exchange Commission an insurable loss?

Holding below: Supreme Court, New York County, awarded plaintiff judgment against certain defendants. The Appellate Division, First Department reversed, denied plaintiffs’ motion for summary judgment, granted defendants’ motion for summary judgment declaring that plaintiffs are not entitled to coverage for the disgorgement payment, and so declared.

Matter of Verneau v Consolidated Edison Co. of New York, Inc., 174 AD3d 1022 (3d Dept 2019)

Issue presented: Did liability for a workers’ compensation death claim transfer to the Special Fund for Reopened Cases under Workers’ Compensation Law 25-a?

Holding below: The Appellate Division, Third Department reversed a decision of the Workers’ Compensation Board, held that “the imposition of liability on the Special Fund in this case is not precluded by the . . . statutory amendment [to section 25-a], given that liability was transferred to the Special Fund in December 2011, well before the January 1, 2014 closure date,” and remitted to the Board for further proceedings. The Third Department held that the Court of Appeals’ decision in American Economy Ins. Co. v State of New York (30 NY3d 136 [2017]) was not inconsistent, because “the Court did not specifically state or otherwise suggest that Workers’ Compensation Law § 25-a (1-a) applied to foreclose the Special Fund from continuing to be liable for consequential death claims arising where a decedent had an established workers’ compensation claim for which the Special Fund was already liable prior to January 1, 2014.”

Matter of Rexford v Gould Erectors & Riggers, Inc., 174 AD3d 1026 (3d Dept 2019)

Issue presented: Did liability for a workers’ compensation death claim transfer to the Special Fund for Reopened Cases under Workers’ Compensation Law 25-a?

Holding below: The Appellate Division, Third Department reversed a decision of the Workers’ Compensation Board, held that “the Special Fund is liable for claimant’s consequential death claim inasmuch as liability had been transferred to it in 1997, well before the January 1, 2014 closure date set forth in Workers’ Compensation Law § 25-a (1-a),” and remitted to the Board for further proceedings.

Sassi v Mobile Life Support Services, Inc., 176 AD3d 886 (2d Dept 2019)

Issue presented: Did the plaintiff sufficiently state a claim for employment discrimination under the New York State Human Rights Law?

Holding below: Supreme Court, Duchess County, granted the defendant’s motion to dismiss the complaint. The Appellate Division, Second Department affirmed.

Matter of Zielinski v Venettozzi, 177 AD3d 1047 (3d Dept 2019)

Issue presented: Whether substantial evidence supports the determination finding petitioner guilty of violating a prison disciplinary rule.

Holding below: The Appellate Division, Third Department, upon transfer, confirmed the determination finding the petitioner guilty of violating a prison disciplinary rule and dismissed the petition.

June Decision Days

Ninivaggi v County of Nassau, 177 AD3d 981 (2d Dept 2019)

Issue presented: Does the assumption of the risk doctrine preclude liability against a school district for an injury to an infant plaintiff playing on an irregular playing field?

Holding below: Supreme Court, Nassau County granted the motion of the defendant Merrick Union Free School District for summary judgment dismissing the complaint insofar as asserted against it based on the infant plaintiff’s assumption of the risk. The Appellate Division, Second Department affirmed.

 

And that’s it. Through the first four months of the 2019-2020 Court of Appeals term, the Court granted only 5 cases: 2 from the Second Department, 2 from the Third Department, and 1 from the First Department. Now, after the close of the term, the total is up to 16: 6 from the Second Department, 5 from the First Department, 5 from the Third Department, and none from the Fourth Department.

Only 16 leave grants in an entire year. That’s an incredibly low grant rate. But, unfortunately, it’s not out of the norm in recent years. Another new term starts in a few weeks, and as they say, there’s always next year!

New York Daily Fantasy Sports Suit: Will New Legislation Moot the Constitutional Challenge to DFS?

After the Third Department declared that DFS violates the New York Constitution’s ban on gambling, the thought was that the industry’s only savior would be the seven Judges of the New York Court of Appeals. But now there may be another way.

Yesterday, Senator Joseph Addabo introduced a new bill that could provide a way around the Third Department’s holding that DFS is prohibited gambling and effectively moot the case before the Court of Appeals. A quick refresher: The New York Constitution bans “gambling,” but doesn’t define the term. The Third Department held that the Penal Law definition of what is prohibited gambling governs the extent of the constitutional ban. That is, the Constitution prohibits any games the outcome of which depend upon chance in a material degree, notwithstanding that they may also involve the players’ skill.

Here’s the way around. In addition to providing a new severability clause for the Interactive Fantasy Sports Law, the new proposed legislation would redefine the scope of gambling under the New York Penal Law to exclude daily fantasy sports.

By amending the Penal Law definition of gambling, the new proposed legislation would play right into the Third Department’s holding. If the scope of “gambling” under the Constitution is governed by the Penal Law, as the Third Department held, changing the Penal Law, as the Legislature has the power to do, would fix the constitutional problem (assuming you think there is one—I don’t).

Thus, if the bill is passed and signed into law before the Court of Appeals decides the appeal, it would effectively moot the constitutional challenge because the Court would have to apply the law as it stood at the time of its decision. Now, the Court would still have to agree with the Third Department’s determination that the scope of “gambling” under the Constitution is the same as the Penal Law definition, but that seems likely, given that the Penal Law definition was adopted in the first instance to implement the constitutional ban after it was adopted.

This is a very interesting development, and could have a huge impact on the appeal before the Court of Appeals. It’s definitely something to watch.

Court of Appeals Amends Rules to Expand Digital Submissions

Whether it’s in response to the COVID-19 court closures, or it was just time to bring the Court more into the digital age, the Court of Appeals announced yesterday that it is amending its rules, effective May 27, 2020, to require parties to file digital copies of all civil motions and opposing papers to those motions, and jurisdictional inquiry responses, with the Court. Before this amendment, the Court’s rules had limited digital filings to the briefs and records filed on appeals.

COA Amended Rules Notice

As the Court’s notice to the bar explains, the digital filing does not actually constitute service or filing of the motion. That’s still governed by the CPLR and when the paper copy of the motion papers hits the counter in the Clerk’s Office and is stamped received. But the rule amendments provide that the parties have 7 days after the return date of the motion to upload their digital copies of the motion papers (but of course, you should do it as soon as possible after service—don’t wait if you don’t have to).

What’s most notable about this rule change to me is that the Court is significantly reducing the amount of printed paper copies of the motion papers that have to be filed (from 6 copies to 1), and eliminating entirely the requirement to file paper copies of the Appellate Division briefs and record that must normally accompany civil motions for leave to appeal. That’s an important step. Even the significant revisions to the Appellate Division’s rules in the fall of 2018 still required the parties to file 5 paper copies of the briefs and record. Now at the Court of Appeals, under these rule amendments, you can file your motion for leave with the original and only a single copy for the Court’s use.

Another change to note: under the Court’s rules, you used to have to serve your adversary with two copies of your motion for leave to appeal, and your affidavit of service needed to note specifically that two copies were served (I made the mistake of not noting that two copies were served one too many times, only to get a very nice reminder call from the motion’s clerk upon receipt). No longer. Now, only one copy of the motion needs to be served.

With these changes, here’s hoping that we can move ever closer to a fully digital filing system at both the Court of Appeals and the Appellate Division without the need to serve or submit the extra paper copies that go to sit in a file room somewhere in the basement of Court of Appeals Hall.

COVID-19 Update: New York Court of Appeals and Third and Fourth Departments are Going Virtual Too!

Following the First and Second Department’s forays into virtual Skype arguments, the Court of Appeals announced yesterday that it would be hearing arguments virtually during its June session.

COA NTB 4.23.20

Although some attorneys whose appeals had been scheduled for the March or April/May session won’t get the chance to argue, because the Court will be taking a few previously calendared cases on submission (including an interesting—to me, at least—issue about whether a municipal defendant can exclude one of multiple claimants from a statutorily required pre-suit deposition), most cases from those sessions will be rescheduled for argument later. And the Court has chosen a limited number of cases for the first virtual argument session in the Court’s history in June. The arguments will be livestreamed, as always, so we’ll all get to see what the Judges’ homes or chambers look like (unless of course they’ve figured out how to work virtual backgrounds).

The Third and Fourth Department Expand Virtual Court Operations Too

Not to be left out, the Third and Fourth Department are also following the First and Second Departments’ lead into virtual arguments.  Last Friday, the Fourth Department announced that it was not only going to be scheduling special virtual argument sessions for May and June and holding Skype arguments, but that it was also rescinding its prior order that had suspended appeal perfection and briefing deadlines.  In its place, the Fourth Department set a new schedule for the appeals:

Fourth Department Deadlines

The Third Department too is scheduling special virtual argument sessions for May and June. But, unlike the Fourth Department, the Third Department is continuing its suspension of perfection and briefing deadlines, at least for now.  That may change as we finish up the virtual argument sessions, and the Court sees how well they can work.

Now the Court of Appeals and all four departments of the Appellate Division are hearing arguments virtually, and the work of our appellate courts can continue, even in these times where we’re all working from home.

 

 

COVID-19 Update: Arguments are Back in the First and Second Departments!

Although most New York courts remain limited to hearing designated essential matters, or deciding their already fully submitted motions, the Appellate Division, First and Second Departments are expanding virtual operations for all of their appeals. For appellate lawyers like me, that’s very good news.

Earlier today (April 15th), the First Department released an update advising the bar that it has created two new special argument terms during which appeals will either be submitted on the papers or argued via Skype: (1) the May Special Term, beginning May 4th and ending May 29th, and (2) the June Special Term, beginning June 1st and ending June 26th.

Most notably, the First Department announces that it will allow parties to agree to perfect appeals and e-file motions in non-essential matters, even while the deadlines to do so remain suspended. That means that you can file that long looked-over brief that was ready to be filed a few weeks ago, if the other side agrees.  But again, opposing counsel will have no obligation to respond because the deadlines are still suspended until the Court orders otherwise.

In the Second Department, the Court will continue hearing appellate arguments via Skype, if the parties request to be heard. The first round of virtual arguments in late March and early April went off without a hitch, the Court says, and so the next round of arguments are being scheduled for April 27th through May 8th.

Second Department Skype Argument

Although the Third and Fourth Departments remain on the virtual sidelines for now, here’s hoping they’ll embrace the example set by their downstate brethren soon, so we can all get back to arguing, from a safe virtual distance of course!

Are Women Getting a Better Chance to Argue in State Appellate Courts? A Deeper Look at the Numbers Reveals a Troubling Trend in New York

A little less than three years ago, following the in depth look that Adam Feldman took at how infrequently women were getting the chance to argue at the Supreme Court, I took a look at how they were faring at the New York Court of Appeals. Examining the data from the 2016 arguments before the Court, I found that women argued approximately 37% of the time in all of the Court’s argued cases (136 arguments by women attorneys out of 372 opportunities total).

2016 Women Argument Pie Chart

That’s a pretty good rate compared to women’s opportunities to argue at the Supreme Court from 2012 to 2016, which according to Adam’s piece, amounted to 17% to 18% of the total arguments.  But, the total 2016 argument rate of 37% at the New York Court of Appeals masked an underlying divide between criminal cases where women argued nearly half of the time (89 of 188 criminal arguments, for 47%), and civil cases where women argued only 26% of the time (47 out of 184 civil arguments).

Is 2016 truly representative of the chances that women get to argue at the New York Court of Appeals, though? That’s the question that has nagged at me since I first put together the 2016 data.  So I dug a little deeper to find out. I looked at the argument data from 2012 and then from 2019 to see if things were materially different. They were, and not in a good way.

2012 Argument Data Shows a Lower Rate of Women Arguments

2012 Women Total Pie Chart2012 Women Total Bar Chart

If 2016 seemed to provide better opportunities for women to argue at the Court of Appeals than at the Supreme Court, 2012 was worse than 2016. During the 2012 calendar year, there were a total of 420 arguments before the Court of Appeals, but only 120 went to women.  That’s 29%.  There were only 18 cases where women argued on both sides, while their male counterparts did so 98 times. And like in 2016, 2012 also had a big disparity between criminal arguments and civil arguments. Women argued at the Court of Appeals 43% of the time in criminal cases (72 out of 167 available criminal arguments), but only 19% of the time in civil cases (48 out of 253 available civil arguments).

2012 Women Criminal Args2012 Women Civil Args

2019 Argument Data Shows Women Arguing at a Similar Rate to 2012, But With Far Fewer Total Arguments

2019 Women Total Pie Chart2019 Women Total Bar Chart

In 2019, the Court of Appeals heard 168 total arguments, 50 of which were women. That’s a total rate of 30%. Again, cases argued by men on both sides far outpaced cases argued by women on both sides (43 to 10). And the criminal to civil argument divide was still present. Women argued in 44% of criminal cases (31 criminal arguments out of 71 total), but only 20% of civil cases (19 civil arguments out of 97 total).

2019 Women Criminal Args2019 Women Civil Args

The 2012, 2016, and 2019 Argument Data Compared Shows a Significant Issue with the Court of Appeals Taking Fewer Cases

Although the rate of women arguing at the Court of Appeals in 2019 (30%) stayed pretty much the same as in 2012 (29%) and is close to the higher rate of 37% in 2016, the larger issue is that the Court is taking fewer cases and hearing fewer arguments now, which means that there are far fewer arguments that women and other underrepresented groups of advocates could take in the first place.

Comparison Chart

In 2019, the Court of Appeals only had 168 total available argument spots. That’s down 60% from the 420 total available arguments in 2012, and also way down from the 372 total available arguments in 2016. That’s a huge issue.  As can been seen in the table, the total arguments that went to women have declined over the years, from 120 in 2012 to 50 in 2019.

So, although the 32% of arguments being made by women over the three years I looked at is better than has been seen at the Supreme Court, the declining total number of arguments is a large barrier to getting more arguments for women and other underrepresented groups in the legal profession. That’s especially so in civil cases, where the total rate of women arguments before the Court of Appeals over those three years is only a meager 21% (114 civil arguments by women out of 534 total), and there were only 97 total available civil arguments in 2019, down from 253 in 2012 and 184 in 2016.

Beyond the Court of Appeals granting leave to appeal in more cases (which I’m in favor of), I think it would go a long way for Chief Judge DiFiore and the Court to adopt a policy encouraging arguments by women and other underrepresented advocates in the State’s highest court.  Policies like this, which have been adopted by many Judges throughout the state and in the federal courts, can go a long way to set the tone for the legal profession. I think it’s time for the Court of Appeals, on which sits a majority of distinguished women Judges, to lead by example.

COVID-19: New York Courts Take Unprecedented Action to Limit In-Person Appearances

Unprecedented times call for unprecedented measures. And we’re certainly in unprecedented times.  With the spread of COVID-19 growing exponentially each day, Chief Judge Janet DiFiore, Chief Administrative Judge Lawrence Marks, and the entire courts system have decided to take unprecedented action to limit in-court proceedings to only those essential for the administration of justice.  All non-essential proceedings are suspended until further order, and that now includes the filing of all litigation papers, under an order issued by Chief Administrative Judge Marks on March 22nd. While lawyers may keep working on their litigation matters, the courts will not be accepting any filings, except for those in enumerated essential proceedings.

Here’s a quick summary of the measures that the New York courts have adopted to try to do its part to keep its employees and the litigants that normally appear before it each day safe (UPDATED as of March 23, 2020):

The Appellate Division

For the first time that I can recall, the Appellate Division has suspended oral arguments. Each Department is handling it differently. In the First Department, the Court has cancelled all arguments scheduled for March 17, 18, and 19 and is taking those cases on submission. Beginning with the April term, and until the Court orders otherwise, all appeals will be submitted on the briefs or by oral argument through Skype. The Second Department is also taking its appeals on submission, unless the parties request to argue via Skype.

In the Third Department, the Court has strongly encouraged all attorneys who are scheduled to argue during the March term, which runs from March 23rd to 27th, to submit their appeals on the briefs. If argument is required, the Court is rescheduling the arguments for a later date. And in the Fourth Department, the Court has decided to take all arguments scheduled for the March/April term on submission only, without oral argument. Arguments for the May 2020 term will be rescheduled.

All of the Appellate Division Departments have now also issued orders suspending all non-statutory perfection and filing deadlines for the foreseeable future. In the First Department, for example, all deadlines are suspended, except for those cases that have been perfected for the May or June 2020 terms. All other Departments have suspended all deadlines for all cases (the Second Department, Third Department, and Fourth Department orders are here).

To be clear, and to avoid a trap for the unwary, the Appellate Division’s orders did not suspend the statutory deadlines for filing a notice of appeal or a motion for leave to appeal. Those deadlines were not been extended, in the first instance. But Governor Cuomo later issued an executive order tolling all statutory deadlines until April 19th, which includes the service of notices of appeal or motions for leave to appeal. The executive order provides:

In accordance with the directive of the Chief Judge of the State to limit court operations to essential matters during the pendency of the COVID-19 health crisis,   any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to the criminal procedure law, the family court act, the civil practice law and rules, the court of claims act, the surrogate’s court procedure act, and the uniform court acts, or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof, is hereby tolled from the date of this executive order until April 19, 2020.

That fills the gap that had been left by the Appellate Division’s deadline suspension order, and ensures that all deadlines have now been suspended for the duration of this order. Although this executive order only tolls deadlines until April 19th, I would fully expect the Governor to extend this order further if the State’s COVID-19 response is still in full effect as we approach that date.

The Court of Appeals

The Court of Appeals at first decided to proceed with the oral arguments scheduled for its March session, which has argument dates on March 17th, 18th, 24th, and 25th. The Court advised counsel, however, that if they are unable to make it due to the public health crisis, the Court was willing to accommodate argument by videoconference.

As the Court began its first arguments in the March session, it was a remarkable sight to see the Judges observing social distancing by moving Chief Judge DiFiore, Judge Rivera, and Judge Stein from their normal positions on the bench to the advocates’ tables in front of the bench, while the remaining Judges spread out along the bench behind them. As they say, a picture is worth a thousand words:

IMG_3572 (002)

And behind the advocates was an eerily empty courtroom that echoed with each argument.

After holding arguments for the first day of session, the Court of Appeals has now decided to suspend the remainder of its argument calendar for March 18th, 24th, and 25th, and will reschedule those appeals for a later date. The Court will also no longer accept any filings, including stay applications, in person at the Clerk’s Office.

The Trial Courts

In the New York trial courts, only pending criminal or civil trials may continue. Any trials that have not yet begun will be adjourned pending further order. Further, as of March 16th, all evictions and eviction proceedings are suspended until further notice. All other matters are limited to those that the courts have deemed essential.  No other court appearances will be held to try to ensure the safety of court staff and the parties.

These are certainly trying and uncertain times. The New York courts are trying to do their part to ensure that essential judicial services can still be provided, while ensuring the safety of court employees and the public alike. For updated information about court closures or other steps the courts have taken, the New York State Bar Association has put together a site that is being updated daily with new information, which can be found here. Stay safe everyone.

 

New York Daily Fantasy Sports Suit: State’s Appeal as of Right to the Court of Appeals Lets the Games Continue, For Now

After the Appellate Division, Third Department declared virtually the entire 2016 Interactive Fantasy Sports Law that had authorized daily fantasy sports games in the New York unconstitutional, it wasn’t long before the State appealed the decision to the Court of Appeals. Doing so imposes an automatic stay of enforcement of the Third Department’s order, which will allow daily fantasy sports games to continue to be offered in New York until the Court of Appeals decides the issue once and for all. In the meantime, let’s take a quick look at how the CPLR and case law interpreting it provides for an appeal as of right and the automatic stay.

Although permission is usually required to take a case to the Court of Appeals, the daily fantasy sports suit happens to have one of the limited jurisdictional bases that allows a party to bypass a motion for leave to appeal and take an appeal as of right. Under CPLR 5601(b)(1), a party may take an appeal as of right to the Court of Appeals from a final Appellate Division order that directly involves a substantial constitutional question. Although the requirements are easy to state (the constitutional question must be (1) directly involved and (2) substantial), their application is much more difficult.

For a constitutional question to be directly involved, it first must have been preserved both at the trial court and at the Appellate Division. A constitutional issue raised only at the Appellate Division, and reached as a matter of the Appellate Division’s interests of justice jurisdiction, is not enough. The constitutional question must also have been necessarily decided by the Appellate Division.  So, if the Appellate Division decided the case on a number of independent grounds, including nonconstitutional ones, the constitutional question is not directly involved for purposes of an appeal as of right. Here, in the DFS suit, that’s not an issue. The only issue that the Appellate Division decided was whether the Interactive Fantasy Sports law violated the constitutional ban on gambling under Article I, § 9. The constitutional question was, therefore, directly involved.

What does it mean that the constitutional question is substantial?  That’s a case-by-case decision by the Court. The question doesn’t need to be a winner, but it also can’t already have been decided against the appellant’s position in prior precedent. Otherwise, the Court generally looks at a number of things to determine substantiality, including “the nature of the constitutional interest at stake, the novelty of the constitutional claim, whether the argument raised may have merit, and whether a basis has been established for distinguishing a state constitutional claim (if asserted) from a federal constitutional claim” (The New York Court of Appeals Civil Jurisdiction and Practice Outline, at 4). The question whether DFS is prohibited gambling is an issue of first impression, the courts below certainly found merit in Plaintiffs’ arguments, and New York’s constitutional ban on gambling is unique from the federal constitution. I dare to say that this is undoubtedly a directly involved, substantial constitutional question over which the Court of Appeals has jurisdiction, without even needing a jurisdictional inquiry letter to the parties.

Because it is the State taking the appeal as of right, it also gets the benefit of an automatic stay of enforcement of the Appellate Division’s order under CPLR 5519(a)(1). “CPLR 5519(a)(1) grants an automatic stay to the State, and its political subdivisions, their agencies and officers, pending an appeal from a judgment or order. CPLR 5519(e) provides that a stay will be continued pending resolution of a second-level appeal or until a motion for permission to take such an appeal is denied, provided the governmental appellant serves and files its notice of appeal or motion for leave to appeal within five days after service of an adverse order with notice of entry” (Summerville v City of New York, 97 NY2d 427, 430 [2002]). That’s why the State filed its notice of appeal so quickly, when it otherwise had 30 days to do so. By filing early, the State kept the benefit of the automatic stay that it had obtained when it originally appealed Justice Connolly’s order to the Appellate Division.

Although DFS’s future in New York is unclear, the games can continue now as a result of the automatic stay until the Court of Appeals decides whether DFS violates the New York Constitution’s ban on gambling.

New York Daily Fantasy Sports Suit: Appellate Division, Third Department Holds the Entire Interactive Fantasy Sports Law Unconstitutional

Daily fantasy sports may not be long for New York. Article I, § 9 of the New York Constitution bans gambling, plain and simple. That includes, lotteries, pool selling, book making, and “any other form of gambling.” Now, the Appellate Division, Third Department has added DFS to that list of banned games, affirming a trial court judgment that had held that New York’s Interactive Fantasy Sports Law that declared DFS not to be gambling unconstitutional. A copy of the Third Department’s opinion can be read in full here.

The IFS law (Chapter 237 of the Laws of 2016) attempted to exempt “interactive fantasy sports” from the New York Constitution’s ban on gambling. Specifically, it provides:

img_6573

That was the trick. Although the Constitution does not define what is prohibited as “any other form of gambling,” the Legislature had otherwise provided a definition for the term when the legislation implementing the constitutional ban was enacted in 1965. Penal Law § 225.00 (2) defines “gambling” as “stak[ing] or risk[ing] something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.” A “contest of chance,” in turn, is “any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein” (Penal Law § 225.00 [1]). By declaring that DFS was not a contest of chance or a wager on a future contingent event over which the players have no control and, thus, was not gambling, the Legislature tried to claim that it had the power to authorize the games by mere legislation, rather than following the 2-plus year process to amend the Constitution.

The majority of the Appellate Division, however, wasn’t convinced. Rather, the Court held, the Legislature can’t just declare that DFS isn’t gambling. That’s for the Courts to decide, and allowing the Legislature to simply declare that a game isn’t gambling would render the constitutional ban ineffectual:

White Excerpt 1

The Third Department, thus, held that the Penal Law definition of what is prohibited gambling governs the extent of the constitutional ban. That is, the Constitution prohibits any games that depend upon chance in a material degree, notwithstanding that they may also involve the players’ skill. In so holding, the Third Department rejected the State’s argument that the dominating element test for what is gambling should be applied. Under the State’s reasoning, a game wasn’t gambling if skill predominated any element of chance, and it was gambling if the opposite was true. The dominating element test, the Third Department held, however, was fashioned by the Court of Appeals in evaluating lotteries, not gambling, and was rejected by the Legislature when it defined gambling in the 1965 Penal Law implementing legislation as being based on whether chance is involved to a material degree. The Third Department, thus, held that “the Legislature’s own definition of gambling, as included in the Penal Law since 1965, [w]as the appropriate definition for courts to apply when interpreting that word in the pertinent constitutional provision” (Majority Op, at 7).

Turning to DFS, the Court held that “IFS contestants pay an entry fee (something of value) in hopes of receiving a prize (also something of value) for performing well in an IFS contest” (id. at 7-8). That satisfies two of the elements of the Penal Law definition of gambling. So, whether DFS is prohibited gambling would be determined on whether it involved a material degree of chance. And the Third Department held that it did.  Accepting the parties’ stipulation of facts regarding how DFS games work, the Court held

White Excerpt 2

It was as simple as that. Because DFS involves a material degree of chance, the Court held, it is prohibited gambling under the Constitution and cannot be authorized by mere legislation like the IFS Law. The Third Department, thus, affirmed the trial court’s holding that the IFS Law is unconstitutional. But the majority didn’t stop there. It also modified that portion of the trial court judgment that had upheld the IFS Law’s provisions decriminalizing DFS games. Although the Court held that the Legislature had to power to decriminalize DFS, it could not sever the provision from the rest of the IFS Law and, thus, declared it unconstitutional as well.

Justice Stan Pritzker dissented, arguing that the majority went well beyond the appropriate standard of review in this constitutional challenge to the IFS Law. As Justice Pritzker saw it, the Court’s task was to limited to “deciding whether the Legislature rationally determined, after hearing and considering evidence, that IFS contests are not ‘gambling’ as defined under Penal Law § 225.00” (Dissenting Op, at 12). Because ample evidence existed in the legislative record for that determination, Justice Pritzker would have upheld the IFS Law because the Plaintiffs did not meet their initial burden to show that the law was unconstitutional beyond a reasonable doubt.

Indeed, Justice Pritzker reasoned, “the Legislature’s judgment necessarily involved determining whether an IFS contest is a ‘game of chance’ and, as such, analyzing whether the degree of chance is ‘material’ in determining the outcome of an IFS contest. Because it is not seriously disputed that an IFS contest involves a high degree of skill, as was found by Supreme Court, then determining whether the degree of chance inherent in an IFS contest is ‘material’ presented a difficult and nuanced question for the Legislature. And, although it may have been rational to determine that the amount of chance in an IFS contest is material, as did some of the legislators who voted against the bill, it was not at all unreasonable, based upon the legislative record, to conclude otherwise. The difference is that the legislation bears the imprimatur and presumption of constitutionality and, thus, summary judgment should not have been granted in favor of plaintiffs” (Dissenting Op, at 16-17). Furthermore, Justice Pritzker would have held, “Supreme Court incorrectly focused on the fact that the participants do not have actual influence over the athletes. However, this notion was debated by the Legislature and it ultimately concluded that the proper focus is not on the participants’ influence over the real world events and a specific athlete’s performance, but the participants’ unquestionable influence on winning the contest by making skillful choices in assembling a fantasy roster. Indeed, the plethora of evidence that was rationally relied upon by the Legislature in finding that IFS contests are predominantly contests of skill – a finding that Supreme Court accepted – also supports the notion that IFS contestants meaningfully, using certain parameters such as data and salary cap management, influence the outcome of the contests” (id. at 19). Thus, because the Legislature rationally decided that skill predominates over chance in DFS games, Justice Pritzker would have declared that the IFS Law did not violate the New York Constitution’s ban on gambling.

From here, the State will undoubtedly appeal the Third Department’s ruling as of right to the Court of Appeals. Although few jurisdictional predicates exist for as of right appeals to the Court of Appeals, this case satisfies one because the decision directly involves a substantial constitutional question. Once the State serves the notice of appeal, it also gets the benefit of an automatic stay under CPLR 5519 (a) (1), which should preserve the status quo and allow DFS games to continue while the State pursues its appeal. Although not much will change in the near future, the long term viability of DFS in New York is very much in flux.

Within a year or so, we should know once and for all whether DFS games are prohibited gambling banned by the Constitution, or whether the Legislature can rationally decide that they are not gambling and can be authorized by a mere legislative enactment. It’s now up to the seven Judges of the Court of Appeals to make that call.

Court of Appeals Leave Grants for September-December Decision Days 2019

Happy New Year! It’s now 2020 and the Court of Appeals is back in session. It’s time to check in on the cases in which the Court of Appeals has granted leave to appeal from the beginning of the 2019-2020 term.

September 2019 Session

Daniels v New York City Transit Authority, 171 AD3d 601 (1st Dept 2019)

Issue: Whether the trial court abused its discretion by allowing expert witness testimony on non-mandatory “industry standards” and by admitting evidence of data concerning accidents at other subway stations.

Appellate Division Holding: The First Department held that the trial court properly allowed the expert testimony regarding gap standards promulgated by the American Public Transit Association and the Public Transportation Safety Board because they were generally accepted in the industry. The Court also affirmed the trial court’s decision to admit the data concerning accidents at other subway stations.

Matter of Juarez v New York State Office of Victim Services, 169 AD3d 52 (3d Dept 2019)

Issue: Whether New York State Office of Victim Services exceeded its authority under Executive Law article 22 to adopt regulations for the approval of crime victims’ counsel fee requests by amending its regulations to provide that such awards may be considered only for fees incurred in successful administrative reconsideration reviews and judicial review (9 NYCRR 525.9 [a],[c]).

Appellate Division Holding: The Third Department annulled the amended regulations as in excess of authority, and remitted the matter to the Office of Victim Services for reconsideration of the fee requests.

November 2019 Session

Matter of Estate of Youngjohn v Berry Plastics Corp., 169 AD3d 1237 (3d Dept 2019)

Issue: Whether 2009 amendments to the Workers’ Compensation Law authorizing full payment of Schedule Loss Use (SLU) awards in one lump sum at the request of the injured employee altered the rule that where an injured employee dies without leaving a surviving spouse, child under 18 years old, or dependent, only that portion of claimant’s SLU award that had accrued at the time of death is payable to the claimant’s estate, along with reasonable funeral expenses.

Appellate Division Holding: The Third Department held that the 2009 amendments did not alter the longstanding rule that the claimant may only recover that portion of the SLU award that had accrued at the time of his death, and thus modified the Workers Compensation Board’s award that had limited the claimant’s recovery only to reasonable funeral expenses.

December 2019 Decision Days

Aybar v Aybar, 169 AD3d 137 (2d Dept 2019)

Issue: Whether, following the United States Supreme Court decision in Daimler AG v Bauman (571 US 117 [2014]), a foreign corporation may still be deemed to have consented to the general jurisdiction of New York courts by virtue of having registered to do business in New York and appointed a local agent for the service of process.

Appellate Division Holding: The Second Department held that a foreign corporation cannot be deemed to have consented to general jurisdiction by mere presence in New York.

Noteworthy: #AppellateTwitter’s Sean Marotta is counsel of record to one of the parties in Aybar. Looking forward to the briefs in the Court of Appeals!

Cole v Cole, 172 AD3d 680 (2d Dept 2019)

Issue: Whether the trial court properly awarded physical custody of the children of the marriage to the plaintiff and whether the Appellate Division properly directed the parties to contribute pro rata to the children’s future unreimbursed health care expenses.

Appellate Division Holding: The Second Department held that the trial court’s custody award was supported by the record, but that it should have required the parties to contribute pro rata to the children’s future unreimbursed health care expenses under Domestic Relations Law § 240 [1-b] [c] [5].

 

Through the first four months of the term, the Court has maintained its sleepy grant rate, granting only 5 cases, 2 from the Second Department, 2 from the Third Department, and 1 from the First Department. The pace should pick up in the Spring, especially as we head toward the end of the term and Decision Days in June.

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