In many cases, clients tend to place their trust, and often their livelihood, in the hands of their attorney. This expectation can be easily traced back to the attorney-client privilege, one of the oldest common-law privileges for confidential communications.  In some instances, the attorney-client privilege may extend to third parties under the common-interest doctrine, which “is an exception to the traditional rule that the presence of a third party, not an agent or employee of counsel, at a communication between counsel and a client is sufficient to deprive the communication of the confidentiality which is one of the pillars of the privilege” (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 2013 WL 5692013 [Sup Ct, NY County 2013]). Problem solved, right? A recent decision from Manhattan Commercial Division Justice Andrea Masley, however, demonstrates how easily the attorney-client privilege can be waived under the common-interest doctrine.

Background:

In TGT, LLC v. Joseph Meli, et al., Petitioner, a limited liability company organized in the fine state of Minnesota, brought a turnover proceeding to enforce a judgment against the respondents in connection with their fraud scheme involving sales of tickets to Broadway and live-music events. During the proceeding, Petitioner moved to compel respondent Hecht Partners, LLP (“Hecht”), former attorneys for respondent Joseph Meli (“Joseph”), to respond to Petitioner’s judgment enforcement subpoena.

Before argument on the motion, Hecht served Petitioner with a privilege log containing over 700 entries, many of which asserted the common-interest privilege as to communications involving Joseph’s father, respondent Richard Meli (“Richard”, together with Joseph “Individual Respondents”), while Joseph was incarcerated. As a result, the court granted in part and adjourned in part Petitioner’s motion in order to allow Petitioner to review the privilege log and to require the parties to provide additional briefing on the common-interest issue.

During the supplemental briefing, Petitioner argued that Hecht could not demonstrate its burden that any of these communications were privileged on the basis that (i) there was nothing in the record to show Richard was acting as agent for Joseph during Joseph’s incarceration, or that Richard’s participation was necessary to facilitate attorney-client communications; (ii) the Individual Respondents did share not a common legal interest in connection with any pending or reasonably anticipated litigation; and (iii) the attorney work-product doctrine did not attach to documents that could have been created by a layperson.

In opposition, Hecht argued that the documents and communications were protected from disclosure because (i) the communications with Richard were protected because Richard served as Joseph’s agent (i.e., Richard served as Joseph’s power of attorney and signed the engagement agreement with Hecht on Joseph’s behalf); (ii) the attorney-client communications with the Individual Respondents were protected under the common-interest doctrine; and (iii) the documents were protected under the attorney work-product doctrine.  Justice Masley rejected all of Hecht’s arguments.

First, the Court found that Hecht did not provide any evidence to demonstrate (i) that Joseph had a reasonable expectation that the communications between Hecht and Richard, in his capacity as Joseph’s attorney-in-fact, would be confidential; and (ii) how Richard’s participation was necessary to advance attorney-client communications during Joseph’s period of incarceration.

Second, the Court held that Hecht failed to demonstrate how the common-interest doctrine applied to communications with Richard. Specifically, the Court stated that the fact the Individual Respondents worked together in transferring assets and/or funding a trust without violating the restitution orders and judgments against Joseph, did not mean they reasonably anticipated enforcement litigation. Simply put, the Court opined that the Individual Respondents failed to make a substantial showing of the need for a common defense, rather than the existence of a common problem, in order to invoke the protections of the common-interest doctrine.

Third, the Court dismissed Hecht’s theory that the documents and communications were protected under the attorney work-product doctrine based on the fact many of the entries did not relate to legal advice, but rather dealt with scheduling calls and discussing fees.

Upshot

TGT, LLC, demonstrates the substantial risk and uncertainty of sharing information with a third-party during the course of litigation. In addition, this decision serves as a helpful example of the distinction between a “common legal interest” versus a “common problem” among the parties in determining whether the common-interest doctrine applies. And, as set forth in TGT, LLC, a common problem is not enough.  

Since the inception of the New York State Supreme Court Commercial Division Rules in 1993, the rules have been consistently amended and refined by judges with practitioners’ input to “improve the efficiency with which such [commercial] matters were addressed by the court and … to enhance the quality of judicial treatment of those cases.” 

On April 17, 2024, the New York State Office of Court Administration issued a request seeking public commentary on a proposal, recommended by the Commercial Division Advisory Council (“CDAC”), to amend Commercial Division Rules 25-33 to include a preamble. Commercial Division Rules 25-33 – essentially a commercial litigator’s trial manual – provide guidance on the procedure for trial preparation, accelerating trial court proceedings, and alternative methods for resolving commercial disputes.

The proposed preamble to Rules 25-33 of the Rules of the Commercial Division includes the following language:

“The Commercial Division operates in accordance with a series of well-crafted rules and principles designed to achieve and promote the goals of efficient and cost-effective case management. These rules stress organization, preparation and cooperation as well as the use of innovative techniques where appropriate Rules 25-33, which address trial preparation and procedure, reflect these important concepts. These trial rules emphasize the importance of pre-trial preparation and remind the practitioner that such preparation is an essential element of successfully litigating and conducting a complex commercial case and trial…When there is compliance with the rules, the result is an efficient and cost-effective proceeding that will ensure that the court’s time and attention will be used in the manner in which it is intended and avoid unnecessary delay and unintended consequences (emphasis added).”

This proposal, as highlighted by the CDAC, follows the previously adopted preambles – a general preamble to the entire set of Commercial Division Rules, and a preamble applicable to the discovery provisions set forth in Commercial Division Rules 11 through 11-g. The CDAC further notes that this proposal is partially motivated by the success of the adopted preambles aiding practitioners in litigating cases within the bounds of the Commercial Division.

The CDAC states that the rationale for the proposed preamble to Rules 25-23 is to “help business litigants and practitioners better understand the philosophy underlying [Commercial Division] Rules 25-33, which is to be efficient and organized with respect to pre-trial preparation and trial execution.” The CDAC aims for the proposed preamble to guide the conduct of lawyers before and during trials and to acquaint businesses, including businesses in and outside the State, interested in litigating within the confines of the Commercial Division’s trial-based rules.

Comments to the proposal were due by May 24, 2024. In the meantime, while we await the potential adoption of the preamble, we’ll do our best (as always) to keep you up-to-date regarding any other developments within the Commercial Division Rules.

Over a beautiful, sunny weekend earlier this month (May 17-19), commercial litigators and judges from all over the State converged on Saratoga Springs and the beautiful Gideon Putnam Hotel, for the Commercial and Federal Litigation Section Spring 2024 Meeting.  In addition to the receptions, dinners, golf and after-program discussions, all of which were excellent, the Spring Meeting was jam-packed with two days of substantive, thought-provoking and forward-thinking topics. The program was remarkable enough that we here at New York Commercial Division Practice thought it appropriate to report the goings-on for all that could not attend.  

A Thought-Provoking Discussion on Artificial Intelligence and the Law

After a wonderful opening reception and dinner on Friday night to kick off the Meeting, including introductory remarks from ComFed Chair Anne B. Sekel, Esq.; Chair-Elect, Michael Cardello III, Esq.; and Simply Saratoga author, Carol Godette, NYSBA members in attendance were in for a treat first thing Saturday morning, when former Farrell Fritz partner and current U.S. Magistrate Judge for the Eastern District of New York, Hon. James L. Wicks; U.S. District Court Judge for the Southern District of New York, Hon. Mary Kay Vyskocil; Ralph Cater, Esq.; Moya Novella, Esq.; and Stephen Breidenbach, Esq. led a panel discussion about what AI and its platforms are, how they work (or do not work), and how AI is used by litigators in practice.  The panel had attendees on the edge of their seats, demonstrating in real-time the functionality of various AI platforms performing legal tasks such as drafting extension letters, briefs, and deposition outlines, all while attempting to incorporate individual court practice rules.  The panel then took up the ethical and other implications of using AI, including in regards to the duty of competence, duty of diligence, duty to communicate, duty of confidentiality, and the unauthorized practice of law.  It was a great start to the Meeting.  

Continue Reading Happenings from the NYSBA Commercial and Federal Litigation Section Spring 2024 Meeting

A recent decision from the Manhattan Commercial Division reminds us of the ramifications of non-compliance with discovery obligations. Although in my experience courts (especially the Commercial Division) typically do not like to get involved in discovery disputes (see, e.g., ComDiv Rule 14 requiring parties to meet and confer to resolve all discovery disputes); however, they will step in if a party is consistently refusing to participate in discovery and is delinquent in his or her discovery obligations, including by wielding the drastic remedy of striking a party’s pleadings.

In Tsung Tsin Association, Inc., v Tian Xiang Zhu et al., plaintiff Tsung Tsin Association, Inc., a New York not-for-profit corporation, commenced an action against its former officers and directors alleging, among other things, that they (i) engaged in a fraudulent scheme in which they purchased in bulk cemetery plots in the name of the corporation, illegally sold the plots to third parties, and illegally kept the sales proceeds for themselves; (ii) caused the corporation to enter below-market leases in exchange for bribes; and (iii) caused the corporation to re-finance its mortgages on its properties in excess of the existing debt and directed the excess loan proceeds to themselves. Plaintiff asserted causes of action for (i) an accounting; (ii) corporate waste and injury to property; and (iii) violations under the New York Not-for-Profit Corporation Law.  

Defendant Tian Xiang Zhu, a director and co-chair of the board, allegedly possessed critical documents concerning Plaintiff’s claims but routinely served late, deficient, and incomplete responses to Plaintiff’s demands. After months of delay, Manhattan Commercial Division Justice Jennifer G. Schecter ordered Zhu to meet and confer with plaintiff’s counsel regarding his discovery responses and to address any unresolved issues in a joint letter. After Zhu failed to comply, Justice Schecter demanded an explanation from Zhu’s counsel, who once again failed to comply with her directive. Having seen enough from Zhu and his counsel, Justice Schecter granted Plaintiff leave to file a motion to address Zhu’s misconduct, and Plaintiff filed a motion to strike Zhu’s answer.

In opposition to the motion, Zhu’s counsel stated that the motion was moot because Zhu had served updated discovery responses. Justice Schecter disagreed, finding that the updated discovery responses were insufficient, and issued an interim order, which recounted Zhu’s and his counsel’s repeated violations with court directives:

“Enough is Enough. No reasonable attorney should think this is an acceptable way to practice in the Commercial Division. The court cannot tolerate counsel that refuses to play by the rules and consequently wastes the resources of the parties and the court trying to compel compliance with the most basic litigation obligations”

Justice Schecter admonished Zhu’s counsel with what had to be done to comply with his client’s discovery obligations – i.e., serving supplemental discovery responses, producing all responsive documents, filing a detailed Jackson affidavit, etc. – but then conditioned her directives as follows:

“Given Zhu’s history of disregarding court orders, anything short of complete compliance with this order will result in the striking of his pleadings. For the avoidance of doubt, this is a conditional order–and counsel should explain to his client what that means.”  

And can you guess what happened next? That’s right, Zhu failed to comply. As a result, Justice Schecter not only made good on her promise to strike Zhu’s answer but also granted Plaintiff permission to file a motion for a default judgment as against Zhu based on his “willful and contumacious” conduct, reasoning that because Zhu and his counsel “ignored and violated virtually every one of the court’s discovery directives,” the court was left with “no confidence that a lesser sanction will impel compliance.”

In my experience, rare is the occasion on which a court will impose the harsh result of striking a party’s pleading. But as exemplified in Tsung Tsin Association, Inc., v Tian Xiang Zhu et al., when a party is given multiple opportunities to comply and even warned of the consequences of non-compliance, the court—in this case the Commercial Division—will bring down the remedial hammer.  Again, Justice Schecter: “[T]his order will make clear that further similar conduct will have serious consequences.” ComDiv practitioners, please be guided accordingly. 

Here at New York Commercial Division Practice, my colleagues and I have waxed poetic about New York’s Commercial Divisionthe nation’s first general trial court devoted exclusively to business litigation, by repeatedly extolling the benefits of practicing in a forum dedicated to and fully adept at adjudicating complex business disputes.  As such, we would be remiss if we did not give our plaudits to the Association of Corporate Counsel (“ACC”) for its 28-year history of contributing to the successful creation and implementation of business courts nationwide.

For those who are unaware, the ACC is a global legal association founded in 1982 that promotes the professional and business interests of in-house counsel through information, education, networking, and advocacy. The ACC has since grown to more than 47,000 in-house counsel members, employed by over 10,000 organizations, in more than 105 countries.  The ACC’s New York City Chapter, serving the five boroughs and Long Island, has over 1,600 in-house counsel members.

On October 16, 2023, the ACC’s Board of Directors, through its Advocacy Committee, endorsed a new business courts policy resolution (its third updated and expanded version) whereby the ACC reaffirmed its commitment to “urg[ing] national judiciaries to consider wherever appropriate the advantages of specialized procedures for resolution of business disputes,” and by encouraging them “to create commercial courts or specialized court divisions dedicated to business litigation.”  In large part due to ACC’s extraordinary advocacy efforts, business courts exist in more than half of the United States, and a number of other countries have similarly followed suit.

As set forth in the ACC’s policy resolution, “[c]ommercial courts result in more cost-effective and timely case processing and an improvement in the quality of dispositions.”  The policy resolution enumerates certain features that commercial courts may utilize to facilitate dispute resolution (some of which we have touched upon here), which include: 

  1. Advanced case management techniques, including close judicial oversight of each stage of litigation and case tracking by type and complexity.
  2. State of the art technology.
  3. Court-annexed alternative dispute resolution to encourage early case settlement.
  4. Cooperation among counsel and with the court in achieving a cost-effective resolution of the dispute.

The policy resolution also emphasizes that business courts “foster a more favorable environment for creating and maintaining businesses, and as a result enhance the economic well-being of their nation.”  

In an article entitled ACC’s Evolving Commercial Courts Leadership which was recently published in the publication “ACC Docket” on April 5, 2024, the ACC “spotlight[ed] as an example the many strides that have been achieved in the State of New York in developing one of the United States’ first business courts.”  In that connection, the article states that “ACC and its New York Chapter have advocated for and supported the Commercial Division of the New York State Supreme Court since its inception in 1995,” and that “[a]t every phase of the development of the Commercial Division, ACC is proud to have been at the forefront to advocate for and celebrate its impact.” 

Lest there be any doubt about the economic impact of the Commercial Division, on March 28, 2024, the NYSBA Committee on Continuing Legal Education, as well as the Business Law and General Practice Sections, sponsored a highly informative lunch-time webinar entitled, “The Economic Benefits of the Commercial Division to the State of New York and to the Success of Your Law Practice,” which explored how the Commercial Division helps New York State attract and retain businesses, thereby generating tax revenues and providing jobs, as well as how it enables New York businesses to operate more efficiently by reducing the amount of time and resources businesses are required to dedicate to dispute resolution.  A flyer circulated in connection with the webinar outlined the reasons why the Commercial Division is “renowned as one of the world’s most efficient venues for the resolution of commercial disputes.”

No doubt the Commercial Division has had an outsize impact on the New York business community, which once again brings to mind a common refrain around here at Farrell Fritz and on this blog, Get thee to the Commercial Division!

Arbitration can be an effective alternative for parties seeking to avoid drawn-out and costly litigation. As a result, it has become common practice for parties to negotiate arbitration clauses into their agreements. However, parties consenting to arbitration should be prepared to abide by an arbitrator’s discretion, especially regarding discovery. If not, parties might be left empty-handed realizing that New York courts are in no rush to entangle themselves in arbitration proceedings.

Background

In Matter of Investcloud Inc. v Siegal, Investcloud, Inc. (“Petitioner”) sought judicial intervention to compel third party discovery from Siegal and PricewaterhouseCoopers (“Respondents”) in an arbitration proceeding. The arbitration was governed by JAMS Comprehensive Arbitration Rules and Procedures (“JAMS Rules”) and the Federal Arbitration Act (“FAA”).

Before finding themselves in arbitration, Petitioner and Manning & Napier Advisors (“Manning”) had an agreement under which Petitioner would develop software for Manning. Petitioner was selected to provide such services through a request for information process (“RFI”). The RFI process was overseen by Respondents.

Since the RFI process was relevant to the parties’ dispute, Petitioner sought pre-hearing discovery from Respondents in the arbitration proceeding. In spite of multiple subpoenas, Petitioner claimed that Respondents were not fully complying with demands for all relevant discovery needed to arbitrate the dispute. Instead of raising this issue with the designated arbitrator, Petitioner decided to initiate a special proceeding with the court seeking an order compelling Respondents to comply with Petitioner’s discovery demands. The court stayed the arbitration proceeding until resolution of the issue.

Takeaway

Justice Daniel J. Doyle made it clear that New York courts should not inject themselves into arbitration proceedings, especially concerning issues around pre-hearing discovery. In coming to this conclusion, Justice Doyle first considered whether the FAA even allowed for non-party pre-hearing discovery. Noting a circuit split on this issue, Justice Doyle concluded that the court was bound by the Second Department and its holding that an arbitrator is “authorized to order non-party discovery (through subpoena) upon a showing of ‘special need or hardship.’”

However, Justice Doyle explicitly stated that the determination of “special need or hardship” should be made by the arbitrator and not by courts.  Justice Doyle noted that parties voluntarily consent to arbitration to avoid litigation, and “unnecessary entanglement” with courts would hinder that purpose. Further, since the rules of arbitration are “not arbitrary” and sufficiently protect due process, there was no reason for the court to intervene. Finally, Justice Doyle reasoned that arbitrators are in the best position to make these determinations, and any contrary rule from New York courts would act as impermissible entanglement in such proceedings.

Thus, Justice Doyle refused Petitioner’s invitation to get involved in the arbitration proceeding, and denied Petitioner’s request to compel third party discovery.

Conclusion

Arbitration acts as an avenue for parties to resolve their disputes privately and avoid litigation. With that, parties must be prepared to abide by an arbitrator’s rules and procedures. Otherwise, a party might find themselves without any back up, as New York courts are extremely hesitant to intervene in such proceedings.

On February 14, 2024, Chief Administrative Judge Joseph Zayas signed an Administrative Order amending Section 202.70(b)(1) of the Uniform Rules for the Supreme and County Courts (Rules of the Commercial Division of the Supreme Court), and adding a new Rule 9-b to Section 202.70(g). But rather than vest the Commercial Division with new powers, the amendments simply emphasize the capabilities it already has. Amended Section 202.70(b)(1) underscores the Commercial Division’s proficiency in adjudicating technology disputes, and new Rule 9-b reminds litigators of the CPLR’s existing framework for referees. Taken together, the amendments aim to embrace the rising prevalence of technology disputes in business courts, and prod litigators toward an underutilized method of dispute resolution.

Amended Rule 202.70(b)(1)

Rule 202.70(b)(1) lists the types of actions that qualify as “commercial” and may be litigated in the Commercial Division. Prior to the amendment, the rule encompassed actions in which the principal claims involved “breach of contract or fiduciary duty, fraud, misrepresentation, business tort (e.g., unfair competition), or statutory and /or common law violation where the breach or violation is alleged to arise out of business dealings.”

As amended, Rule 202.70(b)(1) now emphasizes that “commercial” cases include those resulting from “technology transactions and/or commercial disputes involving or arising out of technology . . ..” Significantly, the amendment appears within a clause that lists examples of commercial cases, such as “sales of assets or securities; corporate restructuring; partnership, shareholder, joint venture, and other business agreements . . ..” By including the amendment within this clause, the Rule signifies that it does not expand the Commercial Division’s jurisdiction to encompass a new category of cases. Instead, as the Commercial Division Advisory Council (“CDAC”) explains in its Memorandum, the amendment “amplif[ies] the Commercial Division’s capabilities” (Memorandum at 3).

Thus, the rule simply serves as a reminder that the Commercial Division, as “one of the world’s most sophisticated venues for the resolution of commercial disputes and located in the world’s leading financial center and serving as a technology hub,” is uniquely equipped to adjudicate disputes arising from technology (Memorandum at 2). The motivation for the amendment is to “communicate the Commercial Division’s receptivity to, and familiarity with, resolving technology disputes” in light of the “increasingly important role” technology plays in business operations (id.). Further, the amendment takes after the rules of other state business courts that have emphasized their jurisdiction over and experience with technology disputes—namely, Georgia, Iowa, Michigan, North Carolina, Tennessee, Utah, and West Virginia.

In short, the amendment invites attorneys litigating technology disputes to consider New York’s Commercial Division as a venue, and highlights the Commercial Division’s status as a leading business court.

New Rule 9-b

The Administrative Order also adds “Rule 9-b” to Section 202.70(g). The new rule, titled “Referees,” states: “Counsel should be aware that in accordance with CPLR 4301 and 4317(a), on consent of the parties, and with the agreement of the Court, any person may be appointed by the Court to act in place of the assigned Supreme Court Justice, to determine any or all issues or to perform any act, with all the powers of the Supreme Court.”

The Rule is meant to encourage use of referees. Like the amendment to Rule 202.70(b)(1), Rule 9-b does not add any new capabilities, but reiterates the options already available to litigators in the Commercial Division. As the CDAC explains in its Memorandum, this method of adjudication “operates completely within the existing judicial system. The CPLR expressly contemplates this procedure by authorizing, upon consent of the parties and the approval of the court, the appointment of a person to be substituted for the Supreme Court Justice to make all judicial determinations” (Memorandum at 1). Indeed, the text of the new rule points to CPLR 4301 and 4317(a), which provide for the appointment of a referee upon consent and approval.

Rule 9-b reflects the CDAC’s belief “that practitioners, as well as many judges, may not be aware of the availability of this alternative. The proposed rule would bring attention to its utility” (Memorandum at 3). The benefits of using a referee include streamlining the resolution of issues that otherwise would require a formal motion to be addressed through a lengthy and often arduous decision process. Beyond that, increased use of referees could alleviate the strain on Judges, allowing them to devote more attention to the cases on their dockets. 

The new Rule is, of course, voluntary. But the goal is clear: to elevate referee usage so it is on par with mediation and arbitration, both of which have enhanced efficiency in the disposition of cases.

Whether in employment agreements or business transactions, drafters often include certain clauses within these documents to protect their client if litigation arises (e.g., arbitration clauses, forum- selection clauses). However, when not clearly drafted, these clauses can lead to a battle over where the case may proceed. Recently, Manhattan Commercial Division Justice Joel M. Cohen handed down a decision emphasizing the importance of forum-selection clauses and reminding practitioners that an arbitration clause will not automatically be “construed to mean consent to jurisdiction in the courts of New York State.”

Background

In Dembicki v. Synergy Health Network, Inc. plaintiffs, both Florida residents, commenced suit against defendants, a Delaware company and Illinois resident, alleging a claim for breach of contract, retaliation in violation of New York Labor Law (“NYLL”) § 740, and for unlawful deductions from wages under NYLL § 193. According to the Complaint, Plaintiffs’ Executive Employment Agreements (the “Agreements”) with defendants contained the following arbitration clauses (i) “[a]ny controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association”; and (ii) the Agreements “shall be construed in accordance with the laws of New York without regard to conflicts of law principles,” and that “arbitration will be conducted in New York City, New York.”

According to the Complaint, the parties previously engaged in arbitration proceedings for one year until the arbitrator terminated the arbitration with leave for plaintiffs to pursue their claims “in another forum.” Defendants moved to dismiss the Complaint for lack of personal jurisdiction on the grounds that the “choice of an arbitral forum” within the Agreements “does not establish personal jurisdiction in new civil litigation.” In opposition, plaintiffs argued that defendants consented to personal jurisdiction when they selected (i) New York as the venue for dispute resolution; and (ii) New York law to cover any disputes under the Agreements. Justice Cohen rejected both of plaintiffs’ arguments.

First, the Court held “[t]he fact that the contract chooses New York law does not ‘constitute a voluntary submission to personal jurisdiction in New York.’” Second, the Court acknowledged that while “it is well-settled that an arbitration clause containing a forum selection will be upheld by courts, it is equally well-settled that such a clause will be enforced only insofar as it applies to arbitration proceedings and will not be construed to mean consent to jurisdiction in the courts of New York State.” Specifically, the Court found that (i) the parties “could have added a broader New York forum selection clause,” but chose not to do so; and (ii) plaintiffs’ failed to argue and/or demonstrate that there are no alternative forums in which to pursue their claims. Based on the foregoing, the Court granted defendants’ motion to dismiss.

Upshot

The Dembicki decision provides a significant reminder to practitioners that meticulous and attentive drafting is required on the front-end to avoid any potential problem in developing a litigation strategy should it arise.  Moreover, employers should take note of this decision and consider whether their arbitration or forum-selection clauses warrant additional review or revision.

On April 2, 2024, the New York State Bar Association’s (“NYSBA”) Task Force on Artificial Intelligence released a report concerning the use of artificial intelligence (“AI”) in the legal profession (“Report”). New York joins select states, such as Florida and California, whose bar associations have published recommendations on the use of AI. The nearly 90-page Report examined the (1) evolution of AI and generative AI; (2) benefits and risks of AI and generative AI use; (3) impact of the technology on the legal profession; (4) legislative overview and recommendations; and (5) proposed guidelines. To date, the Report is the most comprehensive document provided by a state bar association regarding AI use.

Continue Reading AI Etiquette: A User’s Manual Provided by the NYSBA

As one can easily glean, we here at the New York Commercial Division Practice Blog view New York’s Commercial Division as the heartbeat of business litigation in the United States.  So, we think getting your business litigation in front of the Commercial Division is a big deal.  But what happens when you have a case that meets the requirements for the Commercial Division, and you are not assigned to that Part? 

Generally, there are two ways to be assigned to the Commercial Division under § 202.70[d] of the New York Code of Rules and Regulation (the “Rules”).  The first is for any party to file an RJI with the accompanying Commercial Division Addendum 90 days following service of the complaint.  The second is by consent of the parties via a forum – selection clause in the parties’ contract. 

But what if a party files an RJI before the 90-day period runs without requesting assignment or submitting a Commercial Division Addendum?  The answer lies in § 202.70[e] of the Rules, which permits a party to apply via letter to the Administrative Judge within 10 days of the RJI for transfer to the Commercial Division. 

But what if the request is made outside the time limits in § 202.70[d] and [e] of the Rules? Again, § 202.70[e] of the Rules permits a letter application to the Administrative Judge showing “good cause” for the delay. 

While the timing provisions are relatively simple to work though, the “good cause” standard under CPLR 2004, which requires reasoning for the delay, is a bit more subjective, as a finding of good cause is within the discretion of the Administrative Judge.  It is imperative, therefore, to point the Administrative Judge to applications with analogous issues or facts to support your cause.  As for where to find those decisions, never fear, the Commercial Division itself provides some help in this regard. 

On the New York Courts webpage, the Commercial Division has a page titled Administrative Judge on Transfer Applications. That page provides a list of all the Administrative Judge’s decisions on transfer applications from prior to the effective date of the Commercial Division Rules on January 17, 2006, to the present.

 For example, what if a timely request for Commercial Division assignment was not filed, but you have a related case pending before a Commercial Division Judge?  The Administrative Order in ABG HMX LLC v. Alba Longa Concepts LLC provides precedent for the Administrative Judge granting a transfer for “good cause”, in this context.   And what if a request for Commercial Division assignment is rejected by the clerk’s office but was only a few days late?  Curtis v. Merrill Lynch, et al provides precedent for the Administrative Judge granting a transfer if the request was “untimely albeit only by a matter of days.”  But waiting years before filing a transfer application is not wise.  In ABL Advisor LLC, et al. v. Ian S. Peck, et al, the Administrative Judge denied a transfer application made two years into the litigation, finding that the “rules are designed to ensure that appropriate cases are assigned to the Commercial Division at the inception of the case, not two years into the litigation.”  Finally, what if you have a complex commercial case but one of the issues is arguably excluded from review by the Commercial Division?  In City of New York v. FC 42nd Street Associates, L.P., the Administrative Judge granted transfer of a generally excluded real property case that dealt with the determination of fair market value in relation to rental income, agreeing that while the case “is not an action for the payment of rent only, … the complaint raises complex questions of commercial and arbitration law and belongs in the Commercial Division.”  And there are many more helpful examples for litigators on the Commercial Division’s “Transfer Application” page.  

In short, the next time you find yourself in a position where leave to the Administrative Judge is required for assignment to the Commercial Division, remember the Commercial Division and its readily available resources has you covered. 

Continue Reading Help, I Need to Get My Case into the Commercial Division!! Transfer and Determinations by the Administrative Judge