Fourth Department Affirms Class Certification for Buffalo Jills in Case Against NFL, Bills

In Ferrari v The National Football League, four former members of the Buffalo Jills, the Bills’ cheerleading squad, brought a proposed class action against the NFL, the Bills, and their employer alleging that they weren’t paid for hundreds of hours of work because they were “deliberately misclassified as independent contractors rather than employees.” The Jills’ complaint can be found here.  This suit came on the heels of similar cases brought against the Raiders, Bengals, and 49ers by the teams’ cheerleading squads.  While those cases were either settled (Raiders and Bengals) or dismissed (49ers), the Buffalo Jills case has gone forward.

The latest fight in the case was over class certification, basically, whether the four named plaintiffs in the Jills case can represent the interests and press the wage claims on behalf of all of the current and former members of the Jills as a whole.  Class certification is a key point in a case like this.  If a class is certified, the plaintiffs will have a much stronger position to negotiate a settlement of the case and likely for more money.  If the court doesn’t think the interests are sufficiently similar, however, and all of the plaintiffs are made to bring and prove their own harms and damages, the NFL and Bills would be in a much stronger position.  It’s far less likely that individual Jills will hire their own attorneys and pay to litigate a case for what could end up being a small amount of damages. So, without class certification, many proposed class actions end up being dismissed.  The juice just wouldn’t be worth the squeeze at that point.

In the Jills case, Supreme Court, Erie County held that the Jills’ claims had common questions—whether they were improperly classified as independent contractors instead of employees, and thus were denied wages they should have been paid for appearances in the community—and there were enough affected individuals that the case would be better tried as a class action. Recognizing that this was a pivotal issue in the case, the NFL and Bills appealed.

The Appellate Division, Fourth Department, however, affirmed the class certification order, holding that all five requirements for class certification under CPLR 901(a) had been met.  These are the five requirements that the Court looked at:

a. One or more members of a class may sue or be sued as representative parties on behalf of all if:
1. the class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable;
2. there are questions of law or fact common to the class which predominate over any questions affecting only individual members;
3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;
4. the representative parties will fairly and adequately protect the interests of the class; and
5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

Particularly, the Court held that “the common questions include whether the putative class members were employees or independent contractors and whether defendants failed to pay them in accordance with the law, and we conclude that those questions  predominate over individual questions of damages” (Opn, at 3). The Court also noted that the claims of the four named plaintiffs were the same as the potential class members, and that the named plaintiffs can adequately protect the interests of the rest of the class.  Finally, the Court held that the class action was the preferable means of litigating these claims against the NFL and Bills because “this is a case where the cost of prosecuting individual actions would deprive many of the putative class members of their day in court” (Opn, at 4).

This was a big win for the Jills, and the case will now go back to the Erie County trial court, where the parties will go through discovery, depositions, motion practice, and possibly try to reach a settlement.

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


En Banc Second Circuit Hears Arguments Whether Sexual Orientation Discrimination is Discrimination Because of Sex Under Title VII

The full Second Circuit yesterday heard arguments in Zarda v Altitude Express, which involves the hot button legal question whether Title VII offers protection for sexual orientation discrimination under the clause prohibiting discrimination “because . . . of sex.” In a nearly two-hour argument, with three attorneys arguing on each side, the Court was fairly active in questioning the parties, trying to drive each of them to address the weakest parts of their arguments and help the Court draw a line for what Title VII protects and what it doesn’t.

After a lackluster start by counsel for Plaintiffs, where it took him a great while of stumbling to get into the statutory interpretation question, counsel for the EEOC picked up the mantle for why the agency believes that Title VII does protect against sexual orientation discrimination and ran with it.  As the EEOC amicus brief laid out, there are three theories of interpretation to get there: first, that sexual orientation discrimination requires the employer to take the employee’s sex into account in conjunction with the sex of that employee’s actual or desired partner; second, that sexual orientation discrimination is a form of sex stereotyping prohibited under Title VII by the Supreme Court’s decision in Price Waterhouse v Hopkins; and, third, that it is gender-based associational discrimination treating LGBTQ individuals disparately because of with whom they romantically or sexually associate.

The EEOC counsel was by far, I thought, the most polished of the three on Plaintiffs’ side, and adeptly maneuvered the Judges’ hypotheticals like “how can the discrimination be based on sex if a woman could presumably also be fired for her sexual orientation?”  To that the EEOC’s counsel responded, under that scenario, “both a man and a woman would be fired for not comporting with proper gender roles,” which is prohibited under the Price Waterhouse sex stereotyping theory.

What was most interesting to me was the Judges pushed the EEOC to explain its change in position over the years to now argue that Title VII offers protection against sexual orientation discrimination.  The EEOC’s counsel explained that following the Supreme Court’s decisions over the last 15 or so years concerning LGBTQ rights, the agency undertook a “fresh look” and sought input from both employers and employees on what protections they believed Title VII offered.  This “fresh look,” the EEOC counsel advised the Judges, resulted in the new view on the statutory interpretation question, like the en banc Seventh Circuit undertook in Hively and Chief Judge Katzmann did in his concurrence in Christiansen v Omnicom Group.

The strangeness of the USDOJ’s contrary position certainly was not lost on the Judges during the argument either. As Judge Rosemary Pooler put it, “You know we love to hear from the federal government, but it’s a bit awkward to hear from them on both sides.”  To that, the EEOC counsel could only respond, “Indeed, your Honor.”

That was not the end of the issue. As soon as the USDOJ attorney got up to the lectern, the Judges started in on him.  In fact, the first question before the USDOJ even got out his first sentence was: “Can I interrupt and ask a question about why you’re here?  Doesn’t DOJ ordinarily defer to the EEOC on Title VII questions?” Ouch. The best he could come up with is that the USDOJ is the nation’s largest employer and the interpretation of Title VII would have an impact on it.

And the questions about USDOJ’s participation kept coming in rapid succession. Next, “Who is the representative from the Civil Rights Division on this brief?”  Then, “So in Hively, the EEOC filed an amicus brief, but DOJ did not. Is there some reason why a brief wasn’t filed then, but one is filed now?” And, “With respect to the EEOC and Department of Justice, what is the process that is entered into in terms of filing a brief?  Can the EEOC file its own brief without consultation with the Department of Justice?”  The USDOJ lawyer eventually got so uncomfortable with the questions that he repeated, multiple times, that he didn’t believe it was appropriate to disclose the internal processes of the DOJ as to when and how a brief contradicting the EEOC is filed.

The argument went downhill from there.  The USDOJ reiterated its arguments that men and women are treated the same for the context of their sexual relationships and, thus, sexual orientation discrimination is not discrimination because of sex.  The Judges, however, just didn’t seem to be buying it.

This is a fascinating argument to hear, made even more so because of the Court’s interest in issues other than the pure statutory interpretation of Title VII.  If you have a free two hours, I strongly recommend listening.  The audio is available on the Second Circuit’s website here.

New York Judge Denies State’s Motion to Dismiss Suit Challenging Constitutionality of New York’s DFS Law

Last year, a wave of uncertainty surrounded the legality of daily fantasy sports. In New York, Attorney General Eric Schneiderman brought a high profile suit to enjoin the operation of Draft Kings and FanDuel, arguing that their DFS games violated New York’s constitutional ban on gambling. Specifically, Article I, § 9 of the New York Constitution provides, in relevant part: “no lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling, except [the State lottery, betting on horse races, and casino gambling] shall hereafter be authorized or allowed within this state.”  New York is different.  Gambling isn’t just prohibited by statute that can be easily amended by the Legislature; it is banned by the State Constitution.

In addition to opposing the AG’s lawsuit, Draft Kings, FanDuel, and the entire DFS industry undertook a substantial lobbying effort to legalize DFS in New York.  Instead of pushing for a constitutional amendment to create an exception for DFS from the definition of “gambling” prohibited under the New York Constitution, like the Legislature has done before for the State lottery, horse racing, and most recently to allow casinos, however, the industry decided to try a shorter path.  In New York, a constitutional amendment is, at minimum, a two-plus-year process.  The proposed amendment—here the DFS legalization bill—must be passed in two successive legislatures and then approved at a referendum by the people of the State at a general election.  The DFS industry didn’t want to wait that long.  Instead, they pushed for a one off bill. And that’s just what they got.

In 2016, the New York Legislature passed Chapter 237 of the Laws of 2016, which exempts “interactive fantasy sports” from the New York Constitution’s ban on gambling. Chapter 237, codified in Article 14 of the Racing, Pari-Mutuel Wagering and Breeding Law, provides:

The AG settled the DFS suit against DraftKings and FanDuel, and DFS was up and running in New York for last year’s football season.

Unsurprisingly, a group of plaintiffs challenged the new DFS law, arguing that DFS is gambling prohibited by the New York Constitution, just as the AG had argued in the DraftKings and FanDuel suit.  So, the plaintiffs argued, the Legislature couldn’t just pass a single bill to exempt the games from the constitutional ban.

The State moved to dismiss, arguing that the Legislature has been granted the authority to enforce the constitutional gambling prohibition. which includes the power to define DFS as outside of that prohibition.  The State argues that the Legislature’s enactment was rational, and unless the plaintiffs could establish otherwise beyond a reasonable doubt, the case should be dismissed.

As I had predicted when the motion to dismiss was filed, the Albany County trial judge, Gerald Connolly, denied the State’s motion to dismiss.  The Court essentially held that the State’s arguments are better suited for a post-answer motion for summary judgment, not a pre-answer motion to dismiss on the pleadings.  Accepting each of the allegations of the complaint as true, as the Court must on the pre-answer motion, the Court held that the plaintiffs had sufficiently stated a claim that the DFS law violates New York’s constitutional ban on gambling.

It’s a straightforward and unsurprising decision.  A copy of the Court’s decision denying the motion to dismiss can be found here.

Now, the fireworks really begin.  The parties will fully brief the issues on the merits, and soon enough the Judge will decide whether the legislation authorizing DFS in New York passes constitutional muster.  That decision will not be the end of the case, however.  An appeal to the Appellate Division, Third Department will follow, possibly a stay application depending on how the merits come out below, and then on to the Court of Appeals because a substantial constitutional question is at the heart of the case.  The moral of the story is that this won’t be finally resolved any time soon, and the fate of DFS in New York hangs in the balance.

U.S. Department of Justice Contradicts EEOC, Argues that Title VII Does Not Protect Against Sexual Orientation Discrimination

In Zarda v Altitude Express, Inc., the Second Circuit, sitting en banc, is faced with the question of whether to overrule its prior precedent and hold that Title VII protects against sexual orientation discrimination.  One month ago, the EEOC filed an amicus brief urging the Court to overrule its prior precedent in Simonton v Runyan, and hold that Title VII protects against sexual orientation discrimination by prohibiting discrimination "because of . . . sex."

The U.S. Department of Justice, filing its amicus brief in Zarda, takes the direct opposite position.  The USDOJ argues that the Second Circuit should adhere to Simonton's holding that Title VII does not protect against sexual orientation discrimination.  Title VII does not define the term "sex," the USDOJ notes, but it has generally only been applied to mean gender, that is, being "biologically male or female."  Under the USDOJ's construction then, an employer cannot intentionally treat men and women differently, but can treat gay and straight employees differently as long as the same treatment is accorded between the sexes.

To support this position, the USDOJ argues that when Congress amended the Civil Rights Act in 1991, it declined to add express protection for sexual orientation, notwithstanding that numerous Courts of Appeals had held that it was not included under Title VII's prohibition on discrimination "because of . . . sex." Likening it to Congress' decision to retain the operative text of the Fair Housing Act after multiple Courts of Appeals had held that the FHA authorized disparate impact claims and thereby ratify those decisions, the USDOJ argues that Congress' failure to amend Title VII to include protection for sexual orientation expressly is evidence that it ratified the Courts of Appeals' interpretations restricting protection under the "because of . . . sex" clause to gender.

The USDOJ, however, points to no legislative history underlying the 1991 amendment to the Civil Rights Act, be it a statement from the sponsors of the bill, debate from the floor, or a statement from the President, to suggest that Congress actually intended to ratify the Courts of Appeals' decisions that sexual orientation was not entitled to protection.  With the volumes of legislative history available for each congressional enactment, the USDOJ's failure to come up with any shred of actual evidence to support its ratification theory undercuts its argument.

On the contrary, the USDOJ's ratification argument turns the purpose of the Civil Rights Act of 1991 on its head.  As explained by the EEOC, the 1991 amendments were intended to overrule decisions of the Supreme Court that made it more difficult for employees to prove discrimination claims under Title VII. It was a remedial amendment to provide workers with more protection.  Accepting the USDOJ's argument to deny LGBT employees protection under Title VII seems contrary to its very purpose.

Further, as Sasha Samberg-Champi, a seasoned civil rights lawyer, pointed out on Twitter (@ssamcham), the USDOJ's analogy to Congress' ratification of Courts of Appeals decisions in the Fair Housing Act amendments is inapt.


Although the USDOJ acknowledges that society is changing, it argues that those changes don't grant the courts license to re-write Title VII to include protections against sexual orientation discrimination.  Instead, that role is left to Congress, and Congress has repeatedly declined to change the law.


The Second Circuit is scheduled to hear arguments in Zarda en banc on September 26, 2017 at 2:00 p.m. It will certainly be an interesting argument, and if the Court takes the EEOC's position, it will only further the Circuit split that could lead this case and the issue whether Title VII protects against sexual orientation discrimination to the Supreme Court.

The USDOJ amicus brief can be found here.

Chevron Strikes Again: Second Circuit Holds FMLA Retaliation Plaintiffs Need Only Show Exercise of Rights was Motivating Factor, Not But For Cause

The Family Medical Leave Act provides job protection for workers who need time off for a serious health condition or to care for family members who are suffering from a qualifying condition.  Because of its broad protections, the FMLA has also engendered a substantial amount of litigation.  The claims can take two different shapes: FMLA interference, where a plaintiff alleges that the employer interfered with the exercise of rights under the Act, or FMLA retaliation claims, where the plaintiff claims that the employer took some adverse employment action—that is, termination, suspension, reduction in hours, wages, or benefits, etc.—because of the exercise of FMLA rights.

In Woods v. START Treatment & Recovery Ctrs., it was a FMLA retaliation claim.  The plaintiff, a substance abuse counselor at a non-profit, alleged that START put her on probation and then terminated her because she took FMLA leave while hospitalized with anemia, and actually told her that she couldn’t take FMLA leave to deal with her condition because she was on probation.  START told a different story, of course. It said the plaintiff for years failed to complete the patient notes that were required to qualify for reimbursement from Medicaid.  She was counseled, warned, given extra training, and even put on probation, but she still only finished between 25 to 30% of her patient notes.  All other employees completed 90 to 95%.

After the plaintiff was eventually terminated, she sued claiming that she was retaliated against for exercising her FMLA rights.  At trial, the parties fought about the standard for causation that would be charged to the jury, the plaintiff arguing for a motivating factor analysis and START claiming that but for causation applied.  The District Court adopted START’s formulation and told the jury that in order to succeed on her FMLA retaliation claim, the plaintiff had to show that her exercise of FMLA rights was the but for cause of her termination, that is, that absent her FMLA leave, she would not have been fired.  The jury rendered a verdict for START, and the plaintiff appealed.

The Second Circuit on appeal addressed two unsettled FMLA questions in the Circuit: (1) under what provision of the FMLA do retaliation claims arise, and (2) what kind of causation is required to succeed on a FMLA retaliation claim.  As to the first question, the Court pointed out that although the Circuits are split on the statutory authority for FMLA retaliation claims, two main provisions are generally asserted.

Analyzing the statutory langauge, the Court held that FMLA retaliation claims flow from 29 USC § 2615(a)(1)’s prohibition on interfering with or restraining the exercise of FMLA rights, as the First Circuit has held.

Next, the Court turned to causation, particularly, what causal connection must the plaintiff show between her exercise of FMLA rights and the adverse employment action in order to succeed on her FMLA retaliation claim?  Turning again to the statute, the Court noted that the language of the FMLA’s protections does not provide any standard of causation.  In the absence of any statutory command, the Court analyzed whether Chevron deference was appropriate to a USDOL regulation that provides that employers can’t use the exercise of FMLA rights as a “negative factor” in employment decisions.

Because the FMLA is absolutely silent as to causation, and the USDOL interpretation of the standard for causation was reasonable, the Second Circuit deferred to the USDOL’s interpretation and held that a plaintiff alleging a FMLA retaliation claim need only establish that the exercise of FMLA rights was a motivating factor in the adverse employment action, not the but for cause of it.

This causation decision is a monumental shift in favor of FMLA plaintiffs, and presents an interesting case for Supreme Court review. Indeed, we have a Circuit conflict over which provision of the FMLA gives rise to retaliation claims and a Chevron deferral to an agency gap-filling regulation where the statute is silent on causation, causing a potential conflict with the Supreme Court’s default holding that but for causation applies absent express Congressional intent to negate that standard.  Come on, Justice Gorsuch, this is your chance to make your mark on Chevron deference once and for all.

The Second Circuit’s opinion can be found here.

Expressions Hair Design Update: State Asks Second Circuit to Certify Interpretation of General Business Law § 518 to the Court of Appeals

Seven weeks ago, the Second Circuit asked the parties in Expressions Hair Design v Schneiderman to submit further briefing on whether it should certify to the Court of Appeals the question of how General Business Law § 518, New York’s credit card surcharge law, should be interpreted, whether section 518 is a valid commercial disclosure, and whether the statute validly limits commercial speech as applied to the retailers’ proposed single-sticker pricing scheme.  The parties’ briefs are now in.

Following on the recommendation of Justice Sotomayor in her Supreme Court concurrence, the State argues that the Second Circuit should certify two questions concerning the interpretation of section 518 to the Court of Appeals because the statute’s constitutionality turns on the Court’s answer to those questions.  Particularly, the State asked the Second Circuit to certify these questions:

The Court of Appeals has never addressed the scope of section 518, that is, what exactly the law prohibits.  The State argues that it has consistently interpreted the provision to bar the retailers from showing a single sticker price, but then charging consumers who pay with a credit card more.  “Under this reading, the statute does not apply to a seller that either posts a regular price that is the price that credit-card users pay, or that posts a total dollars-and-cents credit-card price along with a (lower) price for cash users.”  (State’s Brief, at 11).  Although the State claims its interpretation has been consistent, it acknowledges that at least three of the Supreme Court justices expressed doubt about exactly what the law prohibits.  Because of the “lingering interpretive uncertainty over GBL § 518,” the State argues that the Second Circuit should allow the Court of Appeals to resolve any doubt.

The Court of Appeals’ interpretation of section 518 would determine the First Amendment analysis that the Second Circuit must conduct, the State argues, or could show that the statute does not violate the First Amendment “if it were interpreted to prohibit sellers from imposing any price differential on cash and credit-card users—including a cash discount.”  (State’s Brief, at 13-14).  Certification would also allow the Court of Appeals to determine whether the plain text of section 518 may be interpreted in a way to avoid the potential constitutional issue.  Thus, the State argues, “the New York Court of Appeals should be afforded the opportunity to adopt the narrower, less problematic interpretation, using the interpretive tools, presumptions, and standards that it deems proper.” (State’s Brief, at 15 [cleaned up]).

The retailer plaintiffs, on the other hand, argue that certification of the statutory interpretation question to the Court of Appeals is barred by the Supreme Court’s opinion.  The Supreme Court, they argue, “adopted [the Second Circuit’s] interpretation of the law, held that the law proscribes the plaintiffs’ intended speech, and remanded for [the Second Circuit] to analyze § 518 as a speech regulation—an analysis that does not turn on any unsettled question of state law.”  (Plaintiffs’ Brief, at 2 [cleaned up]).  Thus, the Plaintiffs argue, the Supreme Court’s interpretation of the law as a speech regulation forecloses the Second Circuit’s ability to certify “whether the law is a speech regulation (or any other question) to New York state court.”  (Plaintiffs’ Brief, at 17).

Indeed, they point out, although Justice Sotomayor’s opinion is styled as a concurrence, on the point that the case should have been remanded with a direction to certify the interpretation question to the Court of Appeals, she was effectively dissenting from the majority’s refusal to do that.  The Plaintiffs, therefore, argue that the Supreme Court majority’s direction that the Second Circuit decide whether section 518’s ban on credit card surcharges violates the First Amendment allows the Court to do only that, not to certify a question to the Court of Appeals.

Even without their construction of the Supreme Court opinion, the Plaintiffs argue that certification is inappropriate because the Court of Appeals could not construe section 518 as prohibiting any dual pricing scheme because such an interpretation “would directly conflict with a federal statute expressly protecting the right of merchants to provide discounts to cash-paying customers, see 15 U.S.C. § 1666f—and so would likely be preempted under the Constitution’s Supremacy Clause. The constitutional-avoidance doctrine thus has no application in a case like this one, where avoiding one set of constitutional problems necessarily presents the court with an entirely new set of constitutional problems.”  (Plaintiffs’ Brief, at 18).  Finally, the Plaintiffs pointed out that they were not challenging section 518’s application to a two-sticker pricing scheme, so there was no judiciable dispute there to certify to the Court of Appeals.

Given the stark contrast in the parties’ positions, it will be interesting to see which approach the Second Circuit decides to take.  Copies of the State’s brief and the Plaintiffs’ brief are linked here.


Court of Appeals Holds Promissory Estoppel and Unconscionability May Foreclose Reliance on the Statute of Frauds

For years, you work with your grandfather to manage his rental apartments.  When he retires from the business, you take over the rentals and upkeep of the building.  You find tenants.  You pay the mortgage and taxes.  You do everything.  In exchange for your years of work, he orally promises to give you the building free and clear of the mortgage, deeds you the property, and changes his will to ensure that the mortgage is paid out of the proceeds of his estate.  But a few years later, your grandfather revokes the will and signs a new one that no longer provides for the mortgage to be paid off.  Can you still hold him to the deal on which you have relied for all these years?

In Matter of Estate of Hennel (No. 78), previewed here, the Court of Appeals says no.  It feels your pain and admits it’s unfair, but it’s not unconscionable, which is the only way to avoid the statute of frauds bar to oral agreements relating to a will.  Unless enforcement of the statute of frauds’ requirement that testamentary agreements be in writing would be unconscionable, the Court held, a written agreement is necessary.

In Hennel, after the later will was admitted to probate, the grandsons objected arguing that they had a binding deal to have the mortgage for the property paid out of their grandfather’s estate and that they held up their end of the bargain. Surrogate’s Court agreed, and granted the grandsons summary judgment and ordered the grandfather’s estate to pay off the mortgage.

The Appellate Division, Third Department affirmed, but with two Justices dissenting. Although the Court noted that wills are generally revocable at any time, it held that the testimony of family attorney who drafted the first will and the grandsons’ conduct in reliance on their agreement with the grandfather established a binding, irrevocable commitment for the estate to pay off the mortgage.  The Court declined to apply the Statute of Frauds, which would have otherwise barred enforcement of the grandsons’ unwritten agreement with the grandfather because it concerned an testamentory provision, because it would have lead to an unconscionable result in this case.

The dissenting Justices agreed with the majority in large part, including that the Statute of Frauds applied, but departed on unconscionability. The dissenters said, the grandsons sustained a few losses, but they were also well compensated for maintaining and renting out the property.  The few minor losses, the dissent would have held, did not rise to the level of unconscionabilty so as to avoid the Statute of Frauds bar.

The Court of Appeals, for the first time, adopts the rule followed by the Appellate Division departments that “where the elements of promissory estoppel are established, and the injury to the party who acted in reliance on the oral promise is so great that enforcement of the statute of frauds would be unconscionable, the promisor should be estopped from reliance on the statute of frauds” (Opn, at 10).  The Court, therefore, approves the rule in Restatement (Second) of Contracts § 139(1) that an oral testamentary promise may be enforced notwithstanding the statute of frauds if enforcement would be the only way to avoid injustice.  But, the Court is quick to point out that it rejects the Restatement’s suggestion that injustice short of unconscionability will suffice.

The new rule is no comfort to the Hennel grandsons, unfortunately.  The Court held that even if the grandsons had shown that the grandfather’s promise was sufficiently clear and unambiguous, they reasonably relied on it by continuing to manage the rentals, and harm caused by their reliance, they cannot enforce the oral agreement to pay off the mortgage of the estate funds.  As the grandsons admitted, they have been able to pay the mortgage on the property solely out of the funds earned from the rentals, without their own money, and the management of the property has not been so burdensome that they had to neglect other business.  Thus, the Court held, the mere fact that the grandsons did not get the full benefit of their bargain does not make the result unconscionable, that is, so egregious that “no person in his or her senses and not under delusion would make on the one hand, and as no honest and fair person would accept on the other, the inequality being so strong and manifest as to shock the conscience and confound the judgment of any person of common sense” (Christian v Christian, 42 NY2d 63, 71 [1977] [cleaned up]).  In fact, the Court noted, the grandsons could sell the property, pay off the mortgage, and make a $150,000 profit.  So, yes, it’s not fair that the grandfather could later change his mind after the grandsons did everything that they were supposed to, but that is no reason to ignore the law’s requirement that testamentary agreements must be in writing.

The Court of Appeals’ opinion can be found here.

Court of Appeals Holds Bail Bondsmen Can’t Keep Bond Premium if Defendant Not Released

Arthur Bogoraz is a bad dude.  For more than three years, he ran a multi-million dollar no-fault insurance fraud scheme by convincing radiologists to review MRIs and submit fake insurance claims for payment.  He paid the radiologists kickbacks and then not only pocketed the cash, but used the radiologists’ information to set up fake medical companies to perpetuate the scheme on his own.  After he was caught, he fled to the Ukraine two days before he was supposed to surrender to the authorities.  Bogoraz then flew across the globe on his private plane before he was eventually apprehended in Puerto Rico trying to get back into the U.S.

To ensure he wouldn’t flee again, the trial court set his bail at $2 million.  His wife and other family friends obtained a bail bond from Ira Judelson, who was a licensed bail bond agent affiliated with the International Fidelity Insurance Company, a bail bond surety, in exchange for a premium of $120,560.  Judelson posted the bond with the trial court, which then held a hearing, pursuant to Criminal Procedure Law 520.30, to decide whether it would accept the bond.  The trial court, however, upon review of the bond offered, declined to accept it because Bogoraz failed to establish that the premium paid for the bond was not the fruit of criminal conduct. The Appellate Division affirmed the denial of the bond, and the Court of Appeals denied leave to appeal.  Bogoraz was therefore never released from custody.

Because Bogoraz was never released, his wife asked that Judelson return the bond premium because Judelson was never exposed to the risk that Bogoraz would not appear in court when required.  Judelson, however, refused, arguing that he had earned it upon presentation of the bond to the state court in accordance with the Criminal Procedure Law.

This case, Gevorkyan v Judelson, ensued in federal court.  Finding no controlling law, the District Court applied normal contractual principles and held that the parties’ indemnity agreement allowed for Judelson to retain the premium even though the bond was not accepted by the state court and Bogoraz was never released.  The Second Circuit held that New York law was muddled in the area, and so it certified a question to the Court of Appeals:

Whether an entity engaged in the ‘bail business,’ as defined in [Insurance Law] § 6801 (a) (1), may retain its ‘premium or compensation,’ as described in [Insurance Law] § 6804 (a), where a bond posted pursuant to [CPL] § 520.20 is denied at a bail sufficiency hearing conducted pursuant to [CPL] § 520.30, and the criminal defendant that is the subject of the bond is never admitted to bail.

On the appeal, previewed here, the Court of Appeals held that under the Insurance Law, the bail bondsman may only retain a premium for giving a bail bond where the bond is accepted by the Court and the defendant is released.  This interpretation, the Court held, comports with the purpose of the Insurance Law article governing bail bond premiums, which was to ameliorate the many abuses of the bail bond industry, including that criminal defendants were often taken advantage of and charged exorbitant premiums in exchange for the bond.  The Court thus rejected Judelson’s interpretation of the Insurance Law, which would have allowed him to keep the premium merely because he posted the bond regardless of whether it was ultimately accepted by the trial court, as inconsistent with the statute’s purpose.

The Court also held that “[t]he insurance law principle that premium follows risk further supports this result” (Opn, at 10).  The Court noted that in the insurance context, a premium is generally understood as “consideration paid to an insurer for assuming a risk” (id. at 11).  Because there is no risk to the bail bondsman unless the trial court actually accepts the bond and the criminal defendant is released, the bondsman then can’t have earned the premium unless that happens.

A copy of the Court of Appeals’ opinion can be found here.

Second Department Grants Leave to Appeal to Court of Appeals Sua Sponte. Can It Do That?

People v Flores is an important case. In Flores, four criminal defendants were tried together on gang assault charges.  The County Court where they were being tried, however, decided that it was going to empanel an anonymous jury, with the jurors identified only by number, not by name.  The defendants’ objected, arguing multiple times that they were entitled to know the names of the jurors and that they were being deprived of a fair trial, but the County Court denied their objections.  Each was convicted of the charges and was sentenced to prison.

On appeal from the convictions, the Appellate Division, Second Department held that the New York Criminal Procedure Law does not permit the empaneling of an anonymous jury, and because it deprived the defendants of a fair trial, harmless error analysis doesn’t apply.  The Court, therefore, reversed the convictions, and ordered a new trial.  Even the dissenter agreed that the CPL doesn’t allow a court to withhold the names of the jurors from a criminal defendant, but would have found the error harmless and affirmed the convictions.

Important case for criminal defendants, but it wouldn’t have caught my eye if not for what came next.  After the decretal paragraph where the Court formally reversed the judgments of conviction and remanded to County Court for a new trial, the Court, on its own motion, granted the People leave to appeal to the Court of Appeals “if they be so advised.”

A sua sponte grant of leave to appeal.  The Second Department certainly seems to grant leave to appeal more frequently than do the other Appellate Division departments, save maybe the First Department, but to do it sua sponte?  I’ve never seen that.  So, I (and probably I alone) want to know, “Can it do that?”

I’ll start with what the Court says it is doing.  The Court’s order purports to grant leave to appeal pursuant to CPLR 5602(a)(1)(i), which provides for permission to appeal a final order of the Appellate Division that isn’t appealable as of right.  Leaving aside whether the Second Department’s order in Flores is appealable as of right for purposes of this post (an argument likely could be made that the case directly involves a substantial constitutional question), the Appellate Division’s citation to CPLR 5602(a)(1)(i) is just wrong.  The Appellate Division’s order is not final.  It reversed a final judgment of conviction, and ordered a new trial, so there are further proceedings still pending in the case.  Because the Appellate Division’s order is nonfinal, CPLR 5602(a)(1)(i) doesn’t apply.

Next there’s CPLR 5602(b)(1), which just generally provides that the Appellate Division may grant leave to appeal from a nonfinal order, like this one, except in a few instances that don’t apply here.  Ok, so that fits, but what about granting leave sua sponte?  The Second Department’s rules govern motions for leave to appeal to the Court by parties, but don’t seem to contain any rules that would limit the Court’s inherent authority to grant a motion that it makes on its own.

The Appellate Division does regularly grant leave to appeal to itself sua sponte where parties have taken an appeal as of right to the Appellate Division where the trial court order is only appealable by permission (see e.g. Ray v Chen, 148 AD3d 568 [1st Dept 2017] [“we sua sponte deem the notice of appeal from that [nonfinal] portion of the order to be a motion for leave to appeal, and grant such leave”]).  That seems to fit, but still in those cases the party did something to show it wanted to appeal.  It just did the wrong thing (file a notice of appeal) and the Court was correcting the party’s error on its own motion.  It wasn’t giving the party an appeal the party never asked for.

Nevertheless, the Court of Appeals has recognized in the past that the Appellate Division departments have authority to grant leave to appeal sua sponte, but cautioned that they should do so only sparingly and only after clearly articulating the reasons why they are granting leave.  Particularly, in Babigian v Wachtler (69 NY2d 1012 [1987]), the Court held:

Finally, we note that the Appellate Division affirmed Supreme Court’s order, without opinion, and sua sponte granted leave to appeal to this court. The Appellate Division’s certification in the absence of any request by the parties bespeaks its conclusion, after having read the briefs, heard the parties and fully considered the appeal, that issues of law of particular significance were presented that merited the attention of this court, as well as the commitment of further time and expense by the litigants. While this court, and the entire appellate function, are better served when the regular review process is followed, including some articulation of the reasoning the intermediate appellate court chose to adopt when it considered the case and reached its result (see, Rufino v. United States, 69 N.Y.2d 310, 514 N.Y.S.2d 200, 506 N.E.2d 910), such an articulation is all the more important in those few cases singled out by the Appellate Division for sua sponte certification (id. at 1014).

So, it’s clear that the Appellate Division would have authority to grant leave to appeal on its own motion in a civil case, but what about in a criminal one like this?  As Connecticut and Massachusetts criminal appellate lawyer Joe Schneiderman (@connlawjoe on Twitter) reminded me, the civil lawyer, the CPLR generally doesn’t apply to criminal cases; the New York Criminal Procedure Law does.

In fact, the Court of Appeals only a few months ago made that clear in Matter of 381 Search Warrants Directed to Facebook, Inc.  In the Facebook case, the Court of Appeals was faced with whether the denial of a motion to quash a federal Stored Communications Act warrant was appealable, and it held that because the warrants were issued in a criminal case, the CPL governs their appealability.  Here, the Second Department’s order was also issued in a criminal case, so the Court’s citation to CPLR 5602 as the basis upon which it granted leave to appeal is puzzling.

Under CPL 460.20, one judge of the Appellate Division or Court of Appeals may issue a certificate granting leave to appeal to the Court of Appeals in a criminal case.  “An application for such a certificate must be made” on notice to the other side (CPL 460.20[3][a]).  According to Peter Preiser, who wrote the practice commentaries for CPL 460.20, obtaining that certificate is the only way to take an appeal to the Court of Appeals in a criminal case.  Although the statutory text provides the manner in which an application for a certificate granting leave to appeal must be made, it does not seem to preclude a court from exercising its inherent authority to grant the certificate sua sponte.

Although the Court of Appeals has, at times, refused to use analogous provisions of the CPLR to interpret the CPL (see e.g. People v Knobel, 94 NY2d 226, 230 [1999]), because this case involves the inherent authority of a court to act on its own motion, I would suspect that the Court will follow its prior recognition in Babigian that a motion or certificate seeking leave to appeal may be granted sua sponte.

The Second Department’s opinion can be found here.


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