Court of Appeals January Session: Arguments of Interest for January 10, 2018

The Court of Appeals wraps up its January Session arguments on January 10, 2018 with cases that make the procedural geek in me smile. There are three cases on the argument calendar today (the Court’s case summaries can be found here), two of which involve really interesting (to me at least) procedural issues about counterclaims and the courts’ interests of justice jurisdiction. Here are the issues the Court will address: (1) does the Federal Rules of Civil Procedure’s mandatory counterclaims rule apply in New York state litigation to give res judicata effect to a counterclaim that was not pled in a prior federal suit; (2) does an appellate court have interests of justice jurisdiction to review an issue that a criminal defendant waived before the trial court; and (3) is a criminal defendant denied effective assistance of counsel by withdrawing a Hundley motion to suppress a videotaped confession after the trial court has granted a hearing on the motion.

No. 16    Paramount Pictures Corporation v Allianz Risk Transfer AG

In a suit about a lost investment in movies, the issue before the Court of Appeals has absolutely nothing to do with the movie or the lost investment. Instead, it’s the kind of issue that sparks interest in the community of appellate lawyers who look at how the courts work. In this case, Allianz invested in a Paramount film, but agreed to waive any claims against Paramount and not to sue if the investment went south.

The investment tanked, and Allianz sued Paramount in federal court anyway, notwithstanding the waiver of claims and bar to lawsuits. Paramount defended the litigation based on the waiver provision, but never raised the covenant not to sue as an affirmative defense or pled Allianz’s breach of it as a counterclaim in the federal suit. What’s noteworthy about that is that Rule 13(a) of the Federal Rules of Civil Procedure require any party to a suit to assert any mandatory counterclaims that it has in that litigation or else they will later be barred from doing so.

After the federal court predictably dismissed the case because of the waiver provision, Paramount brought this breach of contract suit in state court based Allianz’s breach of the covenant not to sue. Allianz moved to dismiss, arguing that res judicata barred Paramount’s breach of contract claim because it was a mandatory counterclaim that was never asserted in the federal suit and was barred by FRCP Rule 13(a).

Supreme Court denied the motion to dismiss, citing New York’s permissive counterclaims rule under CPLR 3011. New York doesn’t subscribe to the federal mandatory counterclaim rule, the Court held, and to adopt it would conflict with New York’s rule.

The Appellate Division, First Department, however, reversed and dismissed the suit. The Court held that Rule 13(a) should be applied in state court litigation, and Paramount’s breach of contract claim was thus barred by res judicata for failure to assert it as a mandatory counterclaim in the federal suit.

The Court of Appeals will now hear arguments on this issue of first impression in New York. In a practical sense, it would make sense to me that res judicata should bar any mandatory counterclaim that a party was required to assert in a prior federal suit, but failed to do so. Holding the other way would be a disservice to judicial economy and would allow parties to litigate multiple suits in different forums (with different judges and rules) claims that could all be resolved in a single case all at once. But that will be up to the Court to decide.

The Appellate Division, First Department’s order can be found here.

Court of Appeals January Session: Arguments of Interest for January 9, 2018

The Court of Appeals is back for the final week of the January Session. There are only two days of argument this week, and three cases are on the docket today (the Court’s case summaries can be found here). The Court will hear arguments on the following issues: (1) whether the Long Island Power Authority is entitled to governmental immunity from tort liability for its failure to shut down the power grid in Queens before or during Hurricane Sandy; (2) does an indenture trustee have standing to enforce all rights of bondholders, or just limited authority to bring actions for payment on or to enforce the terms of the notes; and (3) whether a criminal defendant is denied a constitutional speedy trial where the prosecution delays his trial for six years while trying to obtain the cooperation of a co-defendant.

No. 11     Connolly v Long Island Power Authority
No. 12     Baumann v Long Island Power Authority
No. 13     Heeran v Long Island Power Authority

In these three consolidated cases, about 180 property owners allege that their homes were destroyed or their properties damages by fires caused when the Hurricane Sandy storm surge came into contact with LIPA’s still live power lines. The property owners allege that this damage was foreseeable and, thus, LIPA was negligent in not shutting down the power grid before the storm.

Supreme Court denied LIPA’s motion to dismiss the cases, holding that it was not entitled governmental immunity because running the power grid is an act within LIPA’s proprietary capacity. Power has traditionally been provided by the private section, the Court reasoned, and so LIPA’s actions could not be immune from the negligence suits.

The Appellate Division, Second Department affirmed, with one Justice dissenting. The majority reasoned that LIPA was created by the Legislature as a substitute for what was formerly a private enterprise, and thus its actions in operating the power grid were proprietary, not governmental. As such, the majority held that LIPA was not immune from suit. The dissenter argued, on the other hand, that LIPA is a governmental entity and its preparations for and responses to the hurricane were governmental functions. The mere fact that the power grid used to be operated privately does not eliminate the governmental nature from LIPA’s actions, the dissenter reasoned.

So, what actions can be held to be in a public authority’s proprietary capacity that would subject it to normal tort liability? Are there any at all?  The Court of Appeals will hear arguments on those questions today.

The Appellate Division, Second Department’s order can be found here.


Court of Appeals January Session: Arguments of Interest for January 4, 2018

The Court of Appeals’ January Session continues on Thursday, January 4, 2018, with three cases on the calendar (the Court’s case summaries can be found here). The Court will hear arguments on the following issues: (1) when is a municipality an intended third-party beneficiary of a professional services contract between a professional and a property owner for the design and construction of a building for the municipality’s use, and when may the professional be held liable for breach of a tort duty independent of his contractual duties; and (2) when may a criminal defendant be held to have the “unlawful intent” to use a household knife, like a box cutter, as a weapon.

No. 8      Dormitory Authority of the State of New York v Samson Construction Co.

DASNY is the public authority that helps facilitate economic development projects for public agencies and private not-for-profits throughout the State.  It issues tax-free bonds and provides construction guidance to assist those projects, and often contracts with professionals and contractors to design and build the projects.  In this case, DASNY contracted with an architect to design and a contractor to excavate and pour the foundation of a $240 million, 15-story forensic laboratory for New York City. As the work was being done, however, the pile driving and other foundation work caused an adjacent building at Bellevue Hospital to settle, damaged the nearby streets and water and sewer infrastructure, and delayed the project by 18 months.

After DASNY and the City sued the architect and contractor, Supreme Court dismissed the City’s claims against the architect because it wasn’t a party to the professional services contract, but denied the architect’s motion to dismiss DASNY’s negligence claim as duplicative of its claim for breach of contract.

The Appellate Division, First Department modified, reinstating the City’s breach of contract claim because an issue of fact existed whether the City was the intended third party beneficiary of the professional services contract.  The First Department also agreed with Supreme Court that a professional could have an independent tort duty to perform its services “consistent with the generally accepted standard of professional care in its industry,” separate from its contractual duties, and a question of fact existed on that issue too.  One Justice dissented in part, and would have held DASNY’s tort claim to be duplicative of its claim for breach of contract, because DASNY was “essentially seeking enforcement of the bargain.”

My quick read is that I think the Appellate Division dissenter got it right. Where DASNY is really just a facilitator of the public project for the City and the City is the real beneficiary of the professional’s work, it seems to me that the City should be an intended third party beneficiary with rights to sue for breach of the contract. Similarly, I have a difficult time seeing the Court holding professionals to have a tort duty independent of its contractual duty in a case like this, where there really was no risk of “catastrophic harm,” as is generally required. We’ll see.

The Appellate Division, First Department’s order can be found here.

Court of Appeals January Session: Arguments of Interest for January 3, 2018

The Court of Appeals’ January Session continues on January 3, 2018 with three cases on the argument calendar (the Court’s case summaries can be found here). The Court will address the following issues today: (1) whether the New York City Housing Authority arbitrarily denied a son succession rights to his deceased mother’s apartment after he had lived with her, without NYCHA’s permission, to care for her during her failing health; (2) can a criminal defendant be convicted of conspiracy to fire-bomb a home where he was present at gang meeting when the plan was discussed and he knew the details of the plan, but was arrested for unrelated crimes before the arson took place; and (3) does the continuing treatment doctrine save a medical malpractice action from the expiration of the statute of limitations where a patient continues to see the doctor for a specific issue even if more than 2 1/2 years lapses between treatments.

No. 5     Matter of Aponte v Olatoye

Jonas Aponte was a good son. After his mother was diagnosed with advanced dementia and her doctors told him it was unsafe for her to live on her own, he moved into her apartment in NYCHA’s Sedgwick Houses in the Bronx to take care of her. NYCHA, however, denied him permanent permission to live in the one-bedroom apartment because it would “create overcrowding conditions.” Although NYCHA was fully aware of the mother’s health condition, it denied a second request to add Aponte as a permanent occupant of the apartment, and also denied his request to keep the apartment pursuant to succession rights after his mother passed away.

After Supreme Court dismissed Aponte’s challenges to the NYCHA determinations, the Appellate Division, First Department reversed, with two Justices dissenting. The majority held that the NYCHA denial of succession rights was arbitrary and capricious because it never considered the mother’s genuine disability, and put Aponte in “an unacceptable Catch-22 — a request to add an additional family member will almost always result in overcrowding [if] NYCHA fails simultaneously to consider transferring the applicant to a larger apartment.” Because, the Court held, NYCHA never gave Aponte or his mother a chance to show what would have been a reasonable accommodation for the mother’s disability, NYCHA’s denial of succession rights can’t be held rational.

The dissenters, on the other hand, would have upheld NYCHA’s determination because Aponte was never an authorized occupant of the apartment for the required one-year period before her death.  Without that precondition, Aponte wasn’t entitled to succession rights to the apartment.

To me, it seems a simple case. NYCHA never really considered the documented need for Aponte to live in his mother’s apartment to care for her, and thus should be estopped from claiming that he didn’t acquire succession rights.  But, I’m not on the Court of Appeals, and it will now have the chance to decide.

The Appellate Division, First Department’s order can be found here.


Court of Appeals January Session: Arguments of Interest for January 2, 2018

Happy New Year! After about a six week layoff, the Court of Appeals’ argument calendar resumes on Tuesday, January 2, 2018 for the first day of the January Session.  The Court will hear arguments today in four cases on the following issues: (1) what is the appropriate standard to be applied for disclosure of private social media posts during discovery; (2) what is the scope of the term “accident” under Retirement and Social Security Law § 363, which provides enhanced pension benefits for police officers and firefighters who are “physically or mentally incapacitated for performance of duty as the natural and proximate result of an accident” while on duty; and (3) whether youthful offender adjudications can be considered when assessing a sex offender’s risk level under the Sex Offender Registration Act.

No. 1     Forman v Henkin

When you post things to social media, whether it’s to Facebook, Twitter, or Instgram, you know that your posts are presumptively open to the public. Unless you restrict the privacy settings of your accounts, anyone can go on your Facebook page or Twitter feed and see, save, or record what you posted. But what about when you do restrict access to your account? Are those posts still available for discovery in litigation?  That’s the question that the Court of Appeals will face in arguments today.

In Forman, Kelly Forman sued Mark Henkin for injuries she suffered when she fell off one of his horses while riding in a state park on Long Island. Forman alleged that the leather strap attaching a stirrup to the saddle broke and caused her to fall. She claims that she suffered a traumatic brain injury that caused “cognitive deficits, memory loss, inability to concentrate, difficulty in communicating, and social isolation.” Although she was an active Facebook user at the time, about a year after her fall, she deactivated her account. Nonetheless, in discovery, Henkin sought an order compelling her to give him unrestricted access to her Facebook account, including posts from the non-public portion of her account.

Supreme Court granted the motion, in part, and ordered that Forman produce some private posts from her Facebook account, “including all photographs of herself that she privately posted after the accident, except those involving nudity or romantic encounters, and also the timing and length, but not the content, of her private Facebook messages.”

The Appellate Division, First Department, modified the order, however, on a 3-2 vote. The majority vacated the portion of the order requiring production of the private Facebook posts, except for any photos that she intended to use at trial. The majority cautioned that mere speculation that some of the private posts might be relevant is an insufficient basis to require production. The dissenters, however, argued that the majority put too high a burden on discovery of private social media documents. Case law over the last few years has tended toward allowing discovery, they said, and Supreme Court’s order was a proper balance under CPLR 3101(a).

The Court of Appeals will now hear arguments on this interesting issue, which will undoubtedly have great impact in personal injury, employment discrimination, and many other types of litigation throughout the state.

The Appellate Division, First Department’s order can be found here.


Court of Appeals November Session: Arguments of Interest for November 16, 2017

The Court of Appeals’ November concludes on Thursday, November 16, 2017, with three cases on the argument docket (the Court’s case summaries can be found here).

First on the calendar is a State Environmental Quality Review Act case, which asks whether the New York State Department of Health took a hard look at the potential adverse environmental impacts of a proposed nursing home facility that will be built in Manhattan next to an elementary school. The Court will then hear a Family Law case, which involves the question whether Family Court has jurisdiction under Family Court Act § 846-a to impose a final order of protection for the willful violation of temporary orders of protection, even where it does not find that the violator did not commit a “family offense” under the statute. The last case on the docket asks whether the New York City Water Board acted arbitrarily and capriciously in imposing a City-wide rate increase while at the same time granting a one-time credit to only certain property owners.

No. 128      Matter of The Friends of P.S. 163, Inc. v Jewish Home Lifecare, Manhattan; Matter of Wright v New York State Department of Health

Every time a construction project is proposed, it generally has to go through a environmental review that identifies all potential adverse environmental impacts that could result if the project is built, takes a “hard look” at whether those impacts are significant, and provides a written reasoned elaboration of the agency’s determination of significance.  In Matter of the Friends of P.S. 163, Inc., the project is a nursing home that was reviewed and approved by the New York State Department of Health.  The proposed 20-story nursing home was to be built on the Upper West Side of Manhattan next to P.S. 163, an elementary school with about 600 students between the ages of 3 and 11.

While any project raises some potential environmental impacts, one next to a school has to be reviewed pretty carefully to ensure that the students won’t be impacted. During the SEQRA review, DOH identified that the construction could potentially cause noise and toxic dust exposure issues, but concluded that the mitigation measures that were selected would ensure that the exposure would not exceed federally acceptable levels.  Based upon that conclusion, DOH approved the nursing home.

Two groups of parents and teachers at the school and residents of nearby apartment buildings challenged the approval, arguing that the SEQRA review didn’t take a hard enough look at the noise and toxic dust impacts and that the mitigation measures weren’t enough to protect the students next door. Supreme Court, New York County agreed and annulled the DOH approval. The Court held that DOH “did not address the particular adverse effects of elevated noise levels on children’s learning abilities or performance in school,” nor “take a sufficiently hard look at additional noise mitigation measures.”  The Court held that DOH did not take a hard enough look at the potential environmental impacts in light of the special concerns of having young elementary school students next door to the construction site.

The Appellate Division, First Department, however, reversed on a 3-1 vote. The Appellate Division held that a higher standard of environmental review doesn’t apply to this project because it is located next to a school.  DOH reasonably evaluated the noise impacts, the Court held, and was obligated only to evaluate and impose mitigation measures to the maximum extent practicable.  The best mitigation measures are not always required. Because DOH relied on the federal standards of exposure to determine whether the mitigation measures imposed would be adequate, the Court held that DOH complied with its obligations under SEQRA.

The Court of Appeals will now hear argument on whether DOH took a hard look at the potential adverse environmental impacts of the nursing home project and whether a higher standard of review should apply to projects that are proposed to be built next to schools, churches, or other sensitive uses.

The Appellate Division, First Department’s order can be found here.

Court of Appeals November Session: Arguments of Interest for November 15, 2017

The Court of Appeals’ November Session continues at Court of Appeals Hall on Wednesday, November 15, 2017 with four cases on the argument docket (the Court’s case summaries can be found here).

First up is a certified question from the Second Circuit Court of Appeals involving reinsurance agreements.  Particularly, the Court of Appeals will hear arguments on whether a per occurrence liability cap in a reinsurance contract limits the total reinsurance available under the contract to the amount of the cap regardless of whether the underlying policy is understood to cover expenses such as, for instance, defense costs. Next, the Court will hear arguments in a workers’ compensation case, asking whether the injured worker, who sustained a work-related injury and obtained a schedule loss of use award, was entitled to ongoing payments for litigation expenses incurred in an action against a third-party tortfeasor.

Finally, the Court will hear arguments in two cases that present the same issue: in a medical malpractice action, when does the statute of limitations begin to run when the theory is that the malpractice is “wrongful birth.” In those cases, the plaintiffs allege that a doctor who treated them for infertility negligently failed to test the egg donors for a chromosomal abnormality before birth, and both children were eventually born with the abnormality.  Does the claim for “wrongful birth” accrue when the doctor failed to do the test or when the children were born?

No. 124      Global Reinsurance Corporation of America v Century Indemnity Co.

In Global Reinsurance, Global issued reinsurance certificates to Century to reinsure insurance policies that Century had issued to Caterpillar Tractor Company.  After Caterpillar was sued in numerous cases relating to alleged exposure to asbestos in Caterpillar’s products, Century was obligated to pay for Caterpillar’s defense expenses in addition to paying up to the liability limits of its policies.  According to Global, Century has paid $60 million to Caterpillar and has agreed to pay $30.5 million more.  Of that amount, Global alleges that 10% is the actual liability loss and 90% is defense costs.

In this dispute, the parties each interpret the reinsurance certificate differently.  Global claims that its liability is capped by the total amount in the “Reinsurance Accepted” section of the certificate, which was intended to include both liability and expenses.  Century counters that the reinsurance cap applies only to the “loss” (e.g., settlement amount, judgment award), and that Global is liable to pay all expenses that exceed that amount.

The U.S. District Court for the Southern District of New York adopted Global’s interpretation, holding that the certificates unambiguously limited Global’s liability for both losses and expenses. See Glob. Reins. Corp. of Am. v. Century Indem. Co., No. 13 Civ. 06577, 2014 WL 4054260, at *4‐7 (S.D.N.Y. Aug. 15, 2014).

Noting that the Court of Appeals had not explicitly spoken on this issue, whether a liability cap in a reinsurance policy limits liability for both losses and expenses, the Second Circuit certified the question to the Court of Appeals.  Particularly, the Second Circuit certified this question:

Does the decision of the New York Court of Appeals in Excess Insurance Co.v. Factory Mutual Insurance Co., 3 N.Y.3d 577 (2004), impose either a rule of construction, or a strong presumption, that a per occurrence liability cap in a reinsurance contract limits the total reinsurance available under the contract to the amount of the cap regardless of whether the underlying policy is understood to cover expenses such as, for instance, defense costs?

The Second Circuit’s opinion can be found here.

Court of Appeals November Session: Arguments of Interest for November 14, 2017

The Court of Appeals returns to Albany for a one-week November Session beginning on Tuesday, November 14, 2017. The Court will hear argument in four cases today.

First on the argument calendar are two cases involving questions about how class actions should work in New York.  In the first, the Court is asked whether putative class members were entitled to notice of discontinuance of the action under CPLR 908 despite that the time for the individual plaintiff to move for class certification had expired under CPLR 902. In the second case, the Court will hear arguments on whether the notice provision of CPLR 908 applies to an action pleaded as a class action but dismissed prior to class certification and whether notice must be provided to the putative class of an impending dismissal.

Next up is a criminal case asking whether a criminal defendant’s waiver of the right to appeal was invalid and whether the denial of the defendant’s requests for a lawyer during pretrial proceedings concerning a DNA test violated the defendant’s right to counsel.  Finally, the Court will hear argument in a residential mortgage-backed securities case involving whether a “sole remedy” provision requiring the seller of residential mortgage-backed securities to cure or repurchase mortgage loans that don’t conform to representations and warranties prohibits the buyers from seeking money damages for breach of a contractual provision providing that the contract contains no untrue statements.

No. 39    Nomura Home Equity Loan, Inc. v Nomura Credit & Capital, Inc. 

Back for a second time, the Court of Appeals will hear reargument in Nomura Home Equity Loan, Inc. today.  In this breach of contract action, the trustee of four residential mortgage-backed securities trusts sought to compel Nomura to repurchase failing mortgage loans pursuant to a procedure outlined in a mortgage loan purchase agreement, or for damages in the event that repurchase was not possible. The trustee alleged that Nomura breached the agreement by making specific warranties about the quality of the loans in section 8 of the agreement, and representing in section 7 of the agreement that the agreement did not contain any untrue statements.  Upon the breach of any of the representations or warranties, the agreement provided that Nomura was obligated to either cure the breach or repurchase the affected loan at the purchase price, and that the requirement to cure or repurchase the defective loans “constitute[d] the sole remedies of the Purchaser against the Seller respecting . . . a breach of the representations . . . contained in Section 8.”

Supreme Court denied Nomura’s motion to dismiss the trustee’s claims for repurchase of the loans, but dismissed the claims for damages, holding that the repurchase obligation was the sole remedy under the agreement. The Court held that the alleged breach of the No Untrue Statements representation was governed by the sole repurchase remedy because to hold otherwise would be to render that clause meaningless.

The Appellate Division, First Department, however, reinstated the damages claims, holding that the sole remedy provision specifically limited its application to a breach of the representations contained in section 8, not to the No Untrue Statements representation contained in section 7. If the sophisticated parties to the agreement wanted to apply the sole remedy provision also to the Section 7 representations, the Court held, they knew how, but declined, to do so.  The Court of Appeals will now have to construe the agreement to determine whether damages should be available to the trustee if Nomura cannot repurchase the distressed mortgage loans.

The Appellate Division, First Department’s decision can be found here.

Court of Appeals October Session: Arguments of Interest for October 18, 2017

The Court of Appeals finishes up the October session arguments on Wednesday, October 18th with three cases on the calendar (the Court’s case summaries can found here).

First on the docket is a case asking whether one attempt at personal service of notices of violation on a property owner was enough of a reasonable attempt to effect personal service to allow the NYC Department of Building to use nail and mail service. A service issue case like this one is the height of procedural nerdery.

Next up, an insurance case where the insurer is trying to avoid paying a $7.3 million wrongful death judgment by arguing that its policy wasn’t issued or delivered in New York. Under the Insurance Law, a prevailing plaintiff can sue a responsible insurer to satisfy the unpaid portion of a judgment if the insurer’s policy was “issued or delivered in this state.” The courts below split on the issue, with Supreme Court saying the policy was issued here, and the Appellate Division holding that it wasn’t.

Finally, the Court will hear a FOIL case about whether all documents related to a sex offender’s wrongful conviction review are exempt from disclosure under the statute because they would reveal a confidential source, and whether the offender may obtain his entire case file and the grand jury minutes under CPL 190.25(4) to support his claim of actual innocence.

No. 120 Matter of Mestecky v City of New York

This is sufficiency of a service case. Exciting, I know. But here’s why it’s important. Service of a notice of violation or a complaint is how the defendant first finds out the allegations against it and gets an opportunity to respond. It’s a due process issue. Without proper service, defendants can be left unaware of claims that they are violating the law. And the burden is placed on the plaintiff, the person or entity claiming that the law has been violated, to make sure that the defendant gets the notice the law requires.

To ensure that happens, the CPLR generally provides certain ways that a plaintiff may serve the defendant. The best, and likely the hardest, way to serve is by personally delivering the notice of violation or the complaint to the defendant. The plaintiff can also deliver the complaint to someone at the defendant’s home or actual business, and then mailing a copy too. Only after making reasonable attempts at trying to serve using those means does the CPLR allow the plaintiff to nail the complaint to the door and mail a copy too. What’s a reasonable number and kind of attempts at service differs by the case, but generally attempts have to be made on different days and at different times.

The New York City Charter also allows the Department of Buildings to serve notices of zoning violations by nail and mail, but only if “a reasonable attempt has been made to deliver such notice to a person in such premises upon whom service may be made as provided for by article three of the civil practice law and rules….” In Mestecky, the DOB tried to serve a property owner with notices of violation for doing construction work without building permits by knocking on the door of the rental property, ringing the doorbell, and then nailing the notices to the door when no one answered. DOB also mailed three of the seven notices of violation to the property owner’s home address. The owner challenged the service as insufficient under the Charter.

An ALJ held that the DOB’s one attempt at service was enough to allow it to resort to nail and mail service, and the notices of violation were affirmed.

The Appellate Division, First Department affirmed, holding that the NYC Charter service provisions did not impose the typical CPLR standards for service, but only required something less. Thus, the Court held, the DOB’s one attempt at service was sufficient to satisfy the “reasonable attempt” requirement before nail and mail service could be used, and dismissed the suit.

On appeal, Mestecky argues that the plain language of the NYC Charter imposes the CPLR requirements for multiple attempts at personal delivery before the plaintiff may resort to nail and mail service. His due process rights require no less, he argues.

The Appellate Division, First Department’s order can be found here.

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