It is commonplace knowledge that the attorney-client privilege protects confidential communications relating to legal advice between a client and an attorney from disclosure. However, a recent decision from Justice Robert Reed of the Manhattan Commercial Division in Brawer v. Lepor serves as a gentle reminder that “communications do not automatically obtain privilege status merely because they were created or communicated by an attorney.”

Brawer involved a dispute among the founders of a company called MedReviews LLC that publishes medical journals, podcasts, webcasts, and seminars. Plaintiff Michael Brawer, a minority member of the company, commenced a lawsuit against the company’s President, Vice President, and majority member due to an alleged mishandling of company assets. In discovery, plaintiff moved to compel defendants to disclose certain withheld documents, and defendants asserted that the documents were withheld on the basis of the attorney-client privilege. After an in-camera review of the withheld documents, the court substantially denied plaintiff’s motion with the exception of requiring the production of defendants’ retention agreements, engagement letters, and invoices from their counsel.

It’s no secret that New York courts generally favor liberal discovery. And the attorney-client privilege is narrowly interpreted to avoid any tension with this policy of open discovery.

To be precise, the attorney-client privilege applies to confidential communications between a client and an attorney only when such communications are made for the purpose of giving or receiving legal advice. In Brawer, the court found that defendants’ attorney was hired to provide legal advice, and that therefore the attorney’s communications with the company’s officers were not discoverable.

The attorney-client privilege also covers communications of an attorney’s agent, such as consulting experts hired by counsel to assist in preparing for a case. In Brawer, the court found that the communications between the defendants, the attorney, and the consulting experts were therefore protected from disclosure.

Under the common interest doctrine, attorney-client communications shared with a third party or among defendants to an action are privileged if there exists a “common legal interest” among the parties in pending or anticipated litigation. In Brawer, the court found that the withheld communications as between the various defendants were privileged because the parties shared a common legal interest in the defense of plaintiff’s action. The court reasoned that when an attorney represents various clients on a matter of common interest, any confidential communications exchanged between the parties are not subject to disclosure.

Plaintiff’s motion, however, was not denied in its entirety insofar as the court held that “retention and engagement letters and invoices [from the attorneys] are discoverable.” The cases cited by the court stand for the further proposition that fee arrangements between attorney and client, or any agreement for legal fees to be paid for by a third person, do not relate to legal advice and therefore are not protected by the attorney-client privilege, thus highlighting the propositions announced at the outset that the mere participation of an attorney in confidential communications does not automatically protect such communications from disclosure.

As practitioners and readers of this blog are aware, responsive pleadings are foundational documents prepared at the earliest stage of a litigation in which the responding party denies, admits, or states that she lacks knowledge or information sufficient to form a belief as to the truth of the allegation. While the substance of the responsive pleading is dictated by CPLR 3018, the form can (and often does) vary. I’m sure we have all come across answers ranging from those that respond to each numbered allegation, answers where the responding party bundles its denials, admissions, and DKIs into fewer paragraphs, and anything in between.

As of Monday, September 12, 2022, responsive pleadings in the Commercial Division will take on a new form, with an eye toward utility and overall efficiency.

On August 17, 2022, Chief Administrative Judge Lawrence K. Marks promulgated amended Commercial Division Rule 6 (Administrative Order 189/2022), which now includes a brand-new subsection “(d).” Rule 6 (d) will require the responding party to prepare her responsive pleading to interlineate in her response each allegation in the pleading. To wit:

Rule 6. Form of Papers.

* * *

(d)          Interlineation of Responsive Pleadings

(1)          For every responsive pleading, the party preparing the responsive pleading shall interlineate each allegation of the pleading to which it is responding with the party’s response to that allegation, and in doing so, shall preserve the content and numbering of the allegation;

(2)          The party who prepared a pleading to which a responsive pleading is required shall, upon request, promptly provide a copy of its pleading in the same word processing software application in which the pleading was prepared to the party preparing the responsive pleading.

Interlineated responses are not a foreign concept to New York attorneys, as it is standard practice for many practitioners when responding to discovery demands. In preparing responsive pleadings in cases before the Commercial Division, practitioners will now be required to re-state each allegation before responding to it, maintaining both the numbering and the content of the allegation. This applies to every type of responsive pleading, whether it is an answer to a complaint, a reply to counterclaims or cross-claims, or an answer to third-party pleadings.

“Readability” and “utility” were reasons cited by the Commercial Division Advisory Council in advocating for the promulgation of this new rule. The new format enables the Court, the parties, and counsel to review the responsive pleading as a self-contained document (instead of pulling up the pleading and its response and performing a side-by-side review each time). The CDAC envisions the heightened utility of interlineated responsive pleadings to come into play in a number of contexts, including motions directed to the pleadings, disclosure, depositions, summary judgment, and trial prep.

In addition, lest practitioners be concerned about the added cost in both time and money associated with preparing the newly mandated form of responsive pleading, the amendment requires counsel for the pleading party to “promptly” provide a copy of the pleading in a native word processing file upon request.

Finally, it is important to note that amended Rule 6 is meant to affect only the form of responsive pleadings, not the content or substance of responses permitted and/or required by the CPLR and caselaw.

Amended Rule 6(d) is effective as of September 12, 2022.

When the Court orders you to attend a Continuing Legal Education (CLE) class on civility “for the harm [you’ve] done to the [legal] profession”– not to mention issues you five-figures in sanctions – you know you’ve done something very, very wrong.  And that’s exactly what happened last month when Manhattan Commercial Division Justice Andrea Masley issued an Order (the “Order”) in Hindlin v Prescription Songs LLC, et al., censuring and sanctioning two seasoned New York attorneys for “uncivil and obstructive behavior” during depositions.

In this complex and contentious litigation, plaintiff Jacob Hindlin (a/k/a J Kash), a highly successful writer and producer of contemporary pop music, commenced an action in 2018 against music publishing and production companies owned by Lukasz Gottwald’s (a/k/a Dr. Luke), seeking a declaratory judgment regarding the parties’ rights and obligations concerning a series of agreements entered into in 2010.

The protracted litigation, which is scheduled for a jury trial on October 31, 2022, has a voluminous record replete with vigorous discovery motion practice leading to Justice Masley’s appointment of a special master to supervise discovery.

The deposition of Jaime Hindlin (plaintiff’s manager and wife), which led to the issuance of sanctions against two veteran attorneys, was conducted via videoconference.  According to the Court, Ms. Hindlin’s attorney interjected 187 times with improper speaking objections and/or colloquy, and instructed Ms. Hindlin not to answer 30 questions without any lawful basis. The plaintiff’s attorney interjected 114 times with improper speaking objections and/or colloquy.

This led the defendants to move for sanctions against the two attorneys in connection with their “improper, incendiary, and unprofessional” conduct at Ms. Hindlin’s deposition. The Court issued a Case Management Order stating that that, upon its review of the deposition transcript, the Court found it necessary to appoint Judge Karla Moskowitz, a retired First Department Justice, to supervise Ms. Hindlin’s continued deposition.

In the Order, the Court, citing various treatises, statutes, and rules concerning the appropriate conduct of attorneys at depositions, admonished (to put it mildly) the two attorneys.

The plaintiff’s attorney, a member of the Committee on Character and Fitness for the First Department for nearly four decades, received the brunt of Court’s powerful rebuke.  The Court noted that it was “not the first time [that the plaintiff’s attorney] has exhibited this type of unprofessional, bullying behavior in this action, though it was only brought to this court’s attention with this motion.”

For example, at his client’s December 2020 deposition, plaintiff’s counsel told the defendants’ attorney that he was “not very good at asking questions, but you are very good at interrupting others,” and that he was “really obnoxious.”  At Dr. Luke’s deposition, he told his adversary to “wipe that silly smile off [his] face.”  At a February 2021 non-party deposition, he called the defendants’ attorney “a joke,” telling him: “You have no knowledge of the law at all. You’re a joke . . . you’re nonsense.”

Judge Masley went so far as to suggest that such reprehensible behavior and conduct during discovery would have been sufficient to warrant dismissal of their clients’ claims.  Unfortunately, the defendants did not move for that relief.  And so, the Court chose to sanction the two attorneys for their conduct, which went well beyond “zealous” representation of their clients.

First, counsel was ordered to reimburse the defendants the attorneys’ fees and expenses incurred at Jaime Hindlin’s deposition and for making the motion.

Second, Jaime Hindlin’s attorney was ordered to pay $2,000 to the Lawyer’s Fund for Client Protection, while the plaintiff’s attorney was penalized $10,000.

Third, and perhaps most notable, Justice Masely ordered both attorneys to attend a New York State Bar Association CLE on civility within 30 days of her Order, and to submit to the Court an affirmation attesting to their attendance and whether they read the New York Standards of Civility as required.  Justice Masley even directed that the CLE instructor utilize the transcript from Jaime Hindlin’s deposition in his seminar “as an example of uncivil sanctionable behavior.”

In addition to being an interesting read, the Hindlin decision serves as a friendly reminder to practitioners that a little decorum never hurt anyone.

A few years back, in a post entitled What the Commercial Division Has Done for Us Lately, we commented on a 2019 report from the Commercial Division Advisory Council, which extolled “The Benefits of the Commercial Division to the State of New York” since its inception in 1995, including how it “has made the business litigation process in New York more cost effective, predictable and expeditious, and has thereby provided a more hospitable and attractive environment for business litigation in New York State.”

The business and legal communities in New York continue to carry the banner of the Commercial Division.  And for good reason.  As highlighted in a recent webinar sponsored by the Business Council of New York, the Commercial Division has become a preferred forum — if not the preferred forum — for resolution of complex business disputes and remains available to businesses of all sizes and all locations, including outside the State of New York.  Indeed, according to Advisory Council chair Robert L. Haig, himself a webinar participant:

Any business, which has a choice, should seriously consider bringing its business litigation in New York and including choice-of-forum clause in its contracts, specifying the Commercial Division as the forum for resolving disputes arising under the contract.

Any business that is concerned about the predictability and the cost of litigation should consider moving its operations, its markets, and even its headquarters to New York State.

Seriously?  New York?  After all, as noted by moderator Heather Briccetti of the Business Council at the outset of the webinar, “New York is a very challenging environment to do business, both in terms of taxes and regulation.”  So why choose to litigate in or even move your company to New York?

Well, according to the various webinar participants — among them representatives from the Association of Corporate Council, the American Bar Association and several current and retired judges, including former Manhattan ComDiv Justice O. Peter Sherwood and Queens County ComDiv Justice Marguerite A. Grays — it’s primarily because the Commercial Division is made up of sophisticated and responsive judges and court staff who possess the requisite commercial expertise to handle a strictly commercial docket, and who have developed a body of well-reasoned and consistently-applied precedent and rules on which businesses and their counsel can predictably rely in the efficient and effective resolution of their disputes.  The fact that the Commercial Division remains on the cutting edge of courtroom technology and other procedural innovations doesn’t hurt either, especially in the COVID and post-COVID era.

Sarah J. Mugel, General Counsel for National Fuel Gas Company, a multi-billion dollar diversified energy company headquartered outside Buffalo, offered an interesting perspective in terms of what matters to corporations and in-house counsel when faced with litigation:

Like most corporations, National Fuel tries to avoid litigation because of its cost and risk, and because of the diversion it causes to those non-legal employees who are involved, taking them away from their regular duties.  While there are many disadvantages to being involved in litigation, the process can be at least somewhat improved when the courts make efforts to do so.  And the Commercial Division . . . has made substantial efforts to improve the litigation process, and companies generally regard these efforts as successful.

The Commercial Division helps businesses resolve our disputes quickly and cost-effectively so we can get on with our business and avoid getting bogged down in litigation quagmires — which is truly, even for the lawyers, what we look forward to.

Drawing on the aforementioned 2019 ComDiv Advisory Council report, Chief Administrative Judge Lawrence K. Marks also offered an interesting perspective from the point of view of economics — particularly, the economic benefits of the Commercial Division to New York, its courts, and its citizens:

The Commercial Division is unique . . . in its ability to help increase business activity within the State, which in turn generates tax revenue and provides employment. These unique characteristics benefit our entire court system and all New Yorkers.

For example, a division or subsidiary that generates $10 billion in annual revenue might incur employee compensation costs of as much as $6 billion, which would result in annual New York income tax revenue of as much as $500 million. The move to New York might also result in annual New York corporate income tax revenue of as much as $50 million.  Thus, the move of a division or subsidiary of one company to New York could result in additional New York income tax revenue of as much as $550 million each year. The annual operating budget for the New York state court system is currently $2.4 billion. If the benefits of greater access to the Commercial Division help to persuade a company to move a $10 billion division to New York, one such move could pay for nearly a quarter of the entire annual operating costs of our court system.

So there you have it.  Sound reasons — from the bench, as it were — for moving your business to rather than from New York, even in this era of mass exodus to more tax-friendly states.  We’ve said it before; we’ll say it again:  Get thee to the Commercial Division!

Litigation in the Commercial Division is efficient and effective in part because its judges strictly enforce the Commercial Division Rules.  Those unsure can peruse Matt Donovan’s “Check the Rules” series on this blog, including (apropos the subject of this post) his post concerning the amendments to Commercial Division Rule 17.

One of the most significant rules of the Commercial Division is the limitation on the size of submissions.  In 2018, the Commercial Division Rules were amended to implement a word limit rather than a page limit.  According to a Memorandum by the Commercial Division Advisory Council, that rule change was designed to reduce incentives for attorneys to fit more text into the page limit. Commercial Division Rule 17 now provides:

Unless otherwise permitted by the court: (i) briefs or memoranda of law shall be limited to 7,000 words each; (ii) reply memoranda shall be no more than 4,200 words and shall not contain any arguments that do not respond or relate to those made in the memoranda in chief; (iii) affidavits and affirmations shall be limited to 7,000 words each. The word count shall exclude the caption, table of contents, table of authorities, and signature block.”

One need not look far to determine how seriously the Commercial Division Justices take the word count limitations.  Justice Borrok’s Part Rules provide that “Word limits specified in Commercial Division Rule 17 will be strictly enforced, unless permission to expand the word limits is granted in advance of the filing of the papers.”  Justices Grays (Queens County), Chimes (Erie County), Gomez (Bronx County), Reed (New York County), and Masely (New York County) all have similar rules.  Justice Jamieson of the Westchester County Commercial Division reminds counsel, “All papers must comply with the applicable provisions of the CPLR and with Rules 16, 17 and 18 of the Commercial Division Rules. In addition, the font size of text and footnotes must be no smaller than 11 point. Papers which do not comply may be rejected.”

Penalties for non-compliance with the word limits can be severe.  In Levine v Cohen, 2019 N.Y. Slip Op. 34059[U], 22 [N.Y. Sup Ct, Nassau County 2019], Nassau County Commercial Division Justice Timothy Driscoll struck an attorney’s affirmation that (among other defects) violated the commercial division word limits.

Last month, New York County Commercial Division Justice Joel M. Cohen issued another warning to the Commercial Division bar about improper attempts to circumvent the word limits of Commercial Division Rule 17 by filing multiple documents in the place of one.  In Durst Pyramid LLC v. Silver Cinemas Acquisition Co., 2022 NY Slip Op 31958(U), the Plaintiff filed a motion for summary judgment that included a nearly 7,000 word memorandum of law, but that memorandum of law did not include a statement of facts.  Rather, the memorandum simply referred the Court to four additional affidavits.  In his ruling on Plaintiff’s motion for summary judgment, Justice Cohen observed:

A brief note on process: Motions for summary judgment require Rule 19-a statements, but such a statement is not a substitute for including a Statement of Facts (with citations to the record) in the Memorandum of Law.  A statement of facts is an integral part of a summary judgment brief, not merely an appendix. And counsel may not evade the applicable word-count limits by omitting facts sections from their briefs. Here, Landlord’s opening submission went on for 414 pages, including a nearly 7,000-word memorandum of law and numerous exhibits, yet did not include a facts section. Instead, counsel referred the Court to four separate affidavits, totaling an additional 11,816 words. Doing so, in the Court’s view, circumvented the wordcount limit set forth in the Commercial Division Rules. While the Court will not strike the opening brief in this instance, counsel are advised that such submissions will not be considered in the future.”

(emphases added, citations omitted)

Counsel have been warned.  The Commercial Division word limitations exist to keep arguments concise, not test whether lawyers can “respectfully refer the Court to” or “incorporate herein” other filings into their memoranda.

Courts continue to refer to federal Racketeering Influenced and Corrupt Organizations Act (“RICO”) claims as “potent weapons” that are equivalent to a “thermonuclear device” in cases involving criminal racketeering activity. So why are we seeing RICO claims in ordinary business litigation disputes, including in the Commercial Division, that bear little to no resemblance to criminal racketeering activity? Perhaps because civil litigants are using RICO claims and the associated remedy of treble damages and attorneys’ fees awards to instill fear of public embarrassment and reputational damage in their adversary and to force defendants to settle or at least to get them to the bargaining table.

RICO was enacted in 1970 to combat organized crime. But RICO has a civil component as well that provides plaintiffs with a private right of action to sue for injuries to their business or property.   To establish a civil RICO claim, a plaintiff must show “(1) a violation of the RICO statute, 18 USC § 1962; (2) an injury to business or property; and (3) that the injury was caused by the violation of Section 1962” (Daskal v Tyrnauer,, 961 NYS2d 357 [Sup Ct, Kings County 2012], aff’d, 123 AD3d 652, 998 NYS2d 412 [2d Dept 2014]).

Among other activities prohibited by RICO, Section 1962(c) prohibits a person from conducting the affairs of an enterprise through a pattern of racketeering. To state a claim for RICO under § 1962(c), a plaintiff must establish that he was injured by the defendant’s “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity” (Invacare Supply Group, Inc. v Star Promotions, Inc., 27 Misc 3d 1202[A] [Sup Ct, Kings County 2010]; 18 USCA § 1962).

In Chana Vashovsky, individually and derivatively on behalf of Hudson Valley NY Holdings LLC, v Yosef Zablocki and National Jewish Convention Center, a matter pending in the Kings County Commercial Division, plaintiff formed an entity, Hudson Valley NY Holdings LLC (“HVNY”), which purchased the Hudson Valley Resort. Plaintiff entered into an agreement with defendant Yosef Zablocki, which gave him a 50% interest in HVNY and caused him to become the managing member in exchange for an investment of $500,000. As with any ordinary business dispute, disagreements arose between Vashovsky and Zablocki with respect to the manner in which the business was being run.  .

Plaintiff initially commenced this lawsuit seeking claims for (i) violation of New York Business Corporation Law § 720(a)(1)(b); (ii) usurpation of corporate opportunities; (iii) conversion; (iv) accounting; (v) breach of fiduciary duty; (v) breach of contract; (vi) indemnification; (vii) unjust enrichment; (viii) fraudulent inducement; (ix) negligent misrepresentation; (x) misappropriation of corporate funds; (ix) fraudulent transfer of assets; and (xiii) dissolution.

In January 2022, approximately ten months after plaintiff commenced this lawsuit, plaintiff filed a motion seeking leave to amend the complaint to include additional causes of action, including a RICO claim. Kings County Commercial Division Justice Leon Ruchelsman denied plaintiff’s motion seeking to amend the complaint to add a RICO claim.

Specifically, Justice Ruchelsman denied plaintiff’s motion because plaintiff failed to demonstrate that defendants engaged in an enterprise – an essential element of a RICO claim. A RICO enterprise is “any individual, partnership, corporation, association or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” To state a valid RICO claim, a plaintiff must plead the existence of an enterprise that is “distinct from the alleged pattern of racketeering activity” (Daskal, 37 Misc 3d 1214[A]). Put differently, “if the sole purpose of the alleged enterprise is to perpetrate the alleged fraud, there can be no enterprise for RICO purposes” (Goldfine v Sichenzia, 118 F Supp 2d 392, 401 [SDNY 2000]).

In this case, the court determined that the complaint did not allege “the enterprise served a purpose other than to engage in the alleged fraud.” In the proposed amended complaint, plaintiff asserted that the RICO defendants “acquired and maintained, directly and indirectly, an interest in and control of,” HVNY, “which enterprise was engaged in, and the activities of which affect, interstate commerce.” The allegations in the proposed amended complaint focused on the fact that defendants were purportedly diverting business opportunities and revenue from HVNY. The court found that the entire enterprise alleged in the proposed amended complaint existed solely to defraud the plaintiffs. Accordingly, Justice Ruchelsman held that plaintiff failed to show the existence of an enterprise and, thus, denied plaintiff’s motion to add a RICO claim.

Interestingly, Justice Ruchelsman denied a motion for leave to amend a complaint to add a RICO claim in a case in which my firm represented defendant CoolFrames, LLC.  In that case, the court similarly held that where the sole alleged purpose of the purported enterprise was to perpetuate a fraud, plaintiff failed to “demonstrate the existence of an enterprise.”

We are seeing more and more litigants attempt to include civil RICO claims in ordinary business disputes. Be mindful of the fact that if a party successfully establishes a RICO claim, they will be entitled to both treble damages and attorney fees. Luckily courts do not favor RICO claims in civil matters in large part because the elements of a civil RICO claims are hard to establish, especially in business disputes.

As readers of this blog are aware—click here, here, here, and here for related posts—the CPLR 3213 motion for summary judgment in lieu of complaint can be a powerful tool to secure an expedited judgment, “meld[ing] pleading and motion practice into one step, allowing a summary judgment motion to be made before issue [is] joined.”  Weissman v. Sinorm Deli, 669 NE 2d 242 (1996)

The New York legislature prescribes only a narrow set of circumstances under which CPLR 3213 may be applied.  When an action is based upon “an instrument for the payment of money only,” CPLR 3213 can save a plaintiff time and money by skipping past the pleadings and discovery stages of litigation, and barreling straight toward a judgment.

That said, Section 3213 of the CPLR is generally unavailable if the sued-upon instrument is ambiguous on the payment obligation and requires proof beyond the face of the instrument, as was recently discussed by the First Department in Talos Capital Designated Activity Co. v 257 Church Holdings LLC (2022 NY Slip Op 03186).

Talos involved a mezzanine lender who sought to collect, pursuant to CPLR 3213, money owed to the lender under certain loan guaranties and pledges following the borrower’s failure to meet its obligations at the “Five Year Paydown,” a five-year checkpoint of the loan.

In the guaranty context, in order to demonstrate entitlement to judgment under CPLR 3213, the plaintiff must show: (1) the existence of the guaranty; (2) the underlying debt; and (3) the guarantor’s failure to perform under the guaranty.

The First Department modified the judgment entered by the trial court in favor of the lender against all defendants, limited to just the judgment against the guarantor under the loan’s Payment Recourse Guaranty.

Rather than looking at the Payment Recourse Guaranty in isolation, the First Department held that when read together with the underlying loan agreement, the Payment Recourse Guaranty was ambiguous as to the triggering event of guarantor’s obligations. Therefore, the lender could not show that the guarantor actually defaulted on his obligations under the Payment Recourse Guaranty.

The underlying loan agreement provided that a nonpayment default by the borrower at the Five Year Paydown date was not considered a default under the loan agreement. Instead, upon a nonpayment default at the Five Year Paydown date, certain penalties were applied (calculated per the loan agreement) and the lender was entitled to exercise a series of elective remedies under certain specifically named guaranties and guaranty pledges. Any remaining deficiency after lender exercised its remedies under these guaranties and pledges would remain outstanding as part of the principal balance due upon the maturity date of the loan.

Critically, the loan agreement did not specifically name the Payment Recourse Guaranty as one of the guaranties and pledges that lender could exercise its remedies against. Thus, the First Department held that the instrument sued upon (the Payment Recourse Guaranty, as informed by the underlying loan agreement) was ambiguous as to whether the appellant-guarantor’s obligation was triggered upon a nonpayment default of the Five Year Paydown, or upon the maturity date of the loan when the borrower’s full obligation becomes due.

Given this material ambiguity, the First Department vacated that part of the judgment as to the guarantor and deemed the moving and answering papers to be the complaint and answer, respectively.

KEY TAKEAWAY

Section 3213 of the CPLR can be an efficient tool to streamline actions that fall within its ambit, but courts are careful to limit the motion’s applicability to only those instruments that are unambiguously clear as to a defendant’s payment obligation.

The Commercial Division in Bronx County hasn’t been around all that long, opening its doors for adjudication in September 2019 with its very first case, Manhattan Beer Distributers LLC v Biagio Cru and Estate Wines, LLC.  Justice Eddie McShan was the first to preside over the ComDiv in Bronx County and remained in that position for more than two years.  Former Bronx County Civil Court Justice Fidel E. Gomez  took the ComDiv reigns in January of this year, after Justice McShan was appointed to the Appellate Division, Third Department.

According to various biographical accounts, including from the Dominican Bar Association, Justice Gomez emigrated to the United States from the Dominican Republic as a young boy and was raised in Manhattan’s Washington Heights neighborhood.  He is a two-time graduate of SUNY Buffalo, receiving both a B.A. in Legal Studies in 1996 and a J.D. from the University at Buffalo Law School in 1999.

Justice Gomez began his career as Assistant Corporation Counsel in the New York City Law Department where he tried more than 30 cases in five years.  After leaving Corp. Counsel’s office in 2004, Justice Gomez spent nearly a decade clerking for current SDNY District Judge Nelson S. Roman, both when Judge Roman was on the bench in Supreme Court, Bronx County (2004-09), as well as the Appellate Division, First Department (2009-13).  Justice Gomez then returned to Bronx County Supreme to clerk for Justices Mitchell J. Danziger, Betty Owen Stinson (Ret.), Barry Salman (Ret.), and Ben Barbado before being elected to the bench himself in November 2017.  Justice Gomez presided in Bronx County Civil Court until his ComDiv appointment January 2022.

By my count as of the day of this post, Justice Gomez has issued six officially-published decisions so far in 2022 — at least three of which involved commercial real property, Yellowstone injunctions, or other commercial lease disputes (see Section 202.70 (b) (3)) — which confirms a continued upward trend in this area over the last couple years, as we have reported here and here.  (More on the substance of Justice Gomez’s decisions in a future post).

Since taking the ComDiv bench, Justice Gomez has instituted a robust set of Part Rules, some of which are worth noting here, particularly for litigators with Bronx commercial practices.  To wit:

  • If you need to address a scheduling matter, email the Court; don’t call Chambers or e-file letter-requests.
  • Familiarize yourself with Microsoft Teams because all court conferences are held virtually.
  • If you’re not sufficiently briefed on your own case and the issues to be conferenced, you will be subject to default and/or sanctions.
  • Before filing a Note of Issue, you must request a settlement conference with the Court, at which you must be authorized to bind your client to a deal.
  • If you don’t provide the Court with a courtesy (hard)copy of your motion papers, your motion will be denied without prejudice.
  • If your motion papers lack proper form, etc., your motion will be denied without prejudice.
  • Your motion for summary judgment is due within 30 days of the filing of the Note of Issue.
  • Make your motions returnable any day of the week, except those brought by Order to Show Cause, which are returnable only on Mondays.
  • Don’t plan on oral argument for any of your motions, except those brought by Order to Show Cause for which appearances are required.
  • All trial-ready cases must go through the Special Trial Part, including ComDiv cases, so Justice Gomez may not be the judge to try your case.
  • If you want to make a motion in limine, you must do so orally before or during trial; ComDiv Rule 27 does not apply.

Finally, Justice Gomez closes out his Part Rules with the following omnibus admonition:

Be prepared and organized.  Be punctual and professionally attired.  Be civil to the Court and to one another.

Duly noted.

As we approach the 30th Anniversary of New York’s Commercial Division, it’s fair to say that over those 30 years, the Commercial Division has held true to its aim of improving the efficiency and judicial treatment of complex commercial matters.  One of the primary ways it does so is through its commitment to continually review and revise its Commercial Division Rules to better meet the needs of the parties and cases appearing before it.  Implementing and enforcing rules developed with efficiency in mind and after careful consultation with Judges and practitioners alike is no small contributor to the success of the Commercial Division.

The latest advancement of the Commercial Division Rules concerns the phase of litigation that has recently exploded in its importance and cost: the collection, review, and production of electronically stored information (“ESI”).

On March 7, 2022, Chief Administrative Judge Lawrence K. Marks signed an administrative order amending Rules 1, 8, 9, 11-c, 11-e 11-g and Appendices of section 202.7(g) of the uniform rules of practices for the Commercial Division of the Supreme Court and county courts.  These changes took effect on April 11, 2022.

The majority of these amendments to the Commercial Division Rules are aimed at modernizing and streamlining the rules concerning ESI.  Here are some notable highlights:

Continue Reading Updates to Commercial Division Rules Concerning Discovery of ESI

As mortgage loan transactions continue to become increasingly complex, lenders often worry about the remedies they have if borrowers fail to live up to their obligations. In the event of a default, lenders have the choice under New York’s election of remedies statute (RPAPL § 1301 (1)) to either (i) enforce the note and/or guaranty and obtain a money judgment, or (ii) pursue an action in equity to foreclose on the mortgage. However, because of New York’s one-action rule (RPAPL § 1301(3)), lenders are barred from bringing simultaneous actions to recover on the same mortgage debt.

In a recent decision from the Suffolk County Commercial Division, Justice Elizabeth H. Emerson  took a close look at New York’s one-action rule and determined that the rule did not apply where a pending lawsuit was not directly tied to collecting on the same mortgage debt.

In Nebari Natural Resources Credit Fund I, LP v Speyside Holdings LLC, et al, defendants, which consisted of multiple LLCs and their members (the “Individual Defendants”) (collectively, “Defendants”) owned two commercial properties consisting of certain parcels of vacant land in Yaphank, New York (the “Yaphank Property”) and Highland Mills, New York (the “Highland Property”). In or around February 2020, plaintiff Nebari Natural Resources Credit Fund I, LP (“Plaintiff”) and Defendants entered into a loan agreement (the “Loan Agreement”), whereby Plaintiff agreed to loan Defendants $ 17 million (the “Loan”) to pay off an existing $ 10 million loan and to provide working capital for the operation of a quarry at the Highland Property. The Loan was secured by, among other things, mortgages on both Properties, pledges by the Individual Defendants of their membership interests in Defendants, and “bad boy” guarantees by the Individual Defendants. However, the relationship between the parties quickly soured, with Plaintiff declaring Defendants in default as early as November 2020.

Following the default, Plaintiff exercised its rights under the Loan Agreement and sought to foreclose on the Individual Defendants’ membership interests, pursuant to UCC Article 9. In response, on or about March 17, 2021, Defendants commenced an action (the “Related Action”) seeking to enjoin the sales of the Individual Defendants’ membership interests.

While the Related Action was still pending, on or about September 1, 2021, Plaintiff commenced the Nebari action against Defendants, seeking to (i) foreclose the mortgages on the Highland and Yaphank Properties; (ii) foreclose its own security interests in the personal property on the Highland and Yaphank Properties; and (iii) recover any deficiency from the Individual Defendants under the “bad boy” guarantees. In response, Defendants filed a motion to dismiss the complaint, arguing that the Nebari action violated New York’s one-action rule under RPAPL § 1301 because (i) Plaintiff exhausted its remedy by pursuing a foreclosure of the Individual Defendants’ membership interests under UCC Article 9, and (ii) Plaintiff’s cause of action for a deficiency judgment constituted a separate action for a money judgment in violation of RPAPL 1301(1). Justice Emerson rejected both arguments.

First, the Court rejected the argument that RPAPL § 1301 barred Plaintiff from commencing the Nebari action, explaining that Plaintiff’s decision to foreclose on the Individual Defendants’ membership interests was “not an action on the note,” nor was it “even a judicial proceeding.”  In addition, the only judicial proceeding relating to UCC Article 9 was the Related Action, which was commenced by Defendants. Further, the Court highlighted that UCC 9-604(a)  provided Plaintiff the remedy of proceeding “against the personal property (the membership interests) without prejudicing any of its rights with respect to the real property.”

Second, the Court rejected the argument that Plaintiff’s cause of action for a deficiency judgment was in violation of RPAPL § 1301, based on the fact that (i) RPAPL § 1371(2) allows a plaintiff in a foreclosure action to make a motion for leave to enter a deficiency judgment, and (ii) New York courts consistently hold that a plaintiff has a right to seek a deficiency judgment against a guarantor in a foreclosure action (Libertypointe Bank v 7 Waterfront Prop., LLC, 94AD3d 1061, 1062 [2d Dept 2012]).

Upshot:

The Nebari decision serves as an important reminder that while RPAPL § 1301 provides lenders with a safety net of remedies, the decision of which remedy to pursue may not always be clear. Therefore, it is critical that counselors advise their clients on other claims and actions that can be pursued against debtors, without running afoul of New York’s one-action rule.