Here at New York Commercial Division Practice, we make a point of highlighting the advantages of practicing in the Commercial Division.  For example, in Have Commercial Dispute, Will Travel (to New York) | New York Commercial Division Practice, we discussed the reasons why practitioners and their clients are (or should be) willing to travel to New York from out of state (or even internationally) to have their commercial disputes resolved.  Similarly, in Commercial Litigation in New York State Courts, 5th Edition, Chapter 39, “Practice Before the Commercial Division”:  A Review | New York Commercial Division Practice, we provided a detailed analysis of the practices and procedures of the Commercial Division as a choice-worthy venue for litigation.  Among other things, the Commercial Division’s status as one of the premier venues for complex business litigation also has the welcome consequence of being a major driver of New York’s economic growth.

That’s the message of a recent article titled “NYSBA Works To Bring Hundreds of Millions of Dollars in Legal Fees to N.Y.,” in which NYSBA President Domenick Napoletano discusses the collaborative efforts of the NYSBA and the Commercial Division Advisory Council to attract commercial litigation to New York.  

This initiative is designed to benefit both NYSBA members and the state’s economy, as attracting a larger volume of commercial litigation to New York creates more opportunities for practitioners (and industry-adjacent experts, consultants, vendors, etc.) to engage in high-value legal work by bringing hundreds of millions of dollars in legal fees into the state. 

For instance, the 2011 Final Report by the NYSBA Task Force on New York Law in International Matters noted the significant impact on law-firm revenue if the volume of business disputes were to increase:

“[I]f the business of dispute resolution in New York were to increase by 10%-20%, it could produce approximately $200 to $400 million in incremental revenues annually for law firms in New York.”

This projection underscores the substantial financial gains that could be realized with even a modest inflow of dispute resolution to New York.  Notably, the Task Force’s projected influx of hundreds of millions of dollars in legal fees was anticipated over 13 years ago, even before the establishment of the Commercial Division Advisory Council.  Today, the Advisory Council’s goals are much higher.

So how are the most influential members of the NYSBA working to drive increased litigation traffic to New York? 

One way is by reemphasizing the Commercial Division’s well-earned reputation.  As Mr. Napoletano notes, “[t]he Commercial Division is renowned as one of the world’s most efficient venues for the resolution of commercial disputes. The excellent reputation of the Commercial Division attracts commercial litigation to New York State which might otherwise be brought in other states or countries.”

In addition, the NYSBA is using a variety of resources, including an informative film (see https://vimeo.com/195552034) and informational flyers (see Commercial-Division-Advisory-Council-BCNYS-Flyer.pdf) to inform businesses about the advantages of litigating in New York.

This initiative is a strategic move that is expected to have a far-reaching impact on the economic landscape of New York, anticipated not only to generate substantial revenue for law firms but also to attract and retain businesses, which in turn contributes to job creation and tax-revenue growth in the state.

The Proclamation issued by the New York City Council in December 20, 2018, underscored the significant value of the Commercial Division, stating that “New York owes much of its world-class status as an economic engine to its world-class court: the Commercial Division of the New York Supreme Court.”  The Proclamation further emphasizes that:

“The Commercial Division is uniquely qualified to increase taxable revenue for the City of New York while stimulating job growth. It strengthens New York City’s ability to attract and retain businesses, which add jobs, fuel demand for real property, and increase tax revenue. The tax revenues from local businesses also provide financial support for the New York State judicial system[.]”

In sum, the NYSBA and the Commercial Division Advisory Council continue to collaborate in making New York a premier destination for commercial litigation.  This should be welcome news to us all, as their initiative not only benefits lawyers and law firms but the state’s economy as a whole.   

Promissory,Note,Grunge,Concept

As many practitioners are aware, the litigation process in New York often feels like a tortoise race, with many cases taking years to resolve. Section 3213 of the CPLR (“Summary Judgment in Lieu of Complaint”) is a bit of an outlier in New York practice, as it provides a mechanism to streamline cases without bearing the delay of protracted litigation. However, because a  CPLR 3213  motion provides for a remedy which precludes a litigant from presenting his evidence to a judge or jury, courts heavily scrutinize this type of motion.

For example, courts tend to dismiss CPLR 3213  motions where the instrument for payment (e.g., a promissory note) requires “outside proof … other than simple proof of nonpayment or a similar de minimis deviation from the face of the document” (Kitchen Winners NY, Inc. v Triptow, 226 AD3d 989, 991 [2d Dept 2024]). But what happens when an additional document (e.g., a Heter Iska) is required to be executed under religious law in connection with a promissory note? This question was recently addressed by Kings County Commercial Division Justice Leon Ruchelsman  in Junik v 61 N. 11 LLC.  

Background and Analysis

In Junik, defendant 61 N. 11 LLC (“61 North”) and the individual defendants (collectively “Defendants”) executed and delivered to plaintiffs Dov Junik (“Junik”), and DSJ Holdings, LLC (“DSJ”) (collectively, “Plaintiffs”) the following documents: (i) a promissory note for $1 million dollars between 61 North and Plaintiffs to be paid over 24 months (the “Note”); and (ii) personal guaranties of the individual defendants, guaranteeing up to fifty (50) percent of the alleged indebtedness of 61 North (the “Guarantees”).

That same day, Junik and one of the individual defendants entered into a Shtar Isko (“Heter Iska”), which is “a device developed in the 12th to 14th centuries to overcome the Biblical prohibition against charging interest by one Jew to another” (Khaimov v Fuzailov, 2020 WL 1059620 [Sup Ct, Queens County 2020]). While certain payments were made towards the principal amount of the Note, Defendants ultimately defaulted on the Note and ceased making payments.

As a result of Defendants’ default, Plaintiffs commenced an action by way of a CPLR 3213 motion for summary judgment in lieu of complaint. In their opposition papers, Defendants argued that “the mere existence of the [Heter Iska], warrants the denial of Plaintiffs’ motion, as the [Heter Iska] is a document consisting of outside proof which was entered into at the same time as the Note, and clearly alters the terms of the Note.” Specifically, Defendants highlighted that the Heter Iska created significant ambiguities: (i) it made zero reference to DSJ or 61 North, two of the three parties to the Note; (ii) three out of the four individual defendants did not sign the Heter Iska; and (iii) the individual defendant who did sign the Heter Iska did not sign the Note.

In his decision, Justice Ruchelsman acknowledged that while the Heter Iska contains different terms than the Note, the Note “clearly evidences a loan and obligations pursuant to that note … unaffected by a Heter Iska” since a Heter Iska is merely a “compliance in form with Hebraic law and does not actually create any partnership, joint venture, or some other profit-sharing Agreement.” Accordingly, the Court held the existence of the Heter Iska did not create any questions of fact concerning the content of the Note, and granted Plaintiffs’ motion for summary judgment in lieu of complaint.

Takeaway

On its face, the Junik decision demonstrates that certain documents, such as a Heter Iska, are the exception to the “outside proof” rule under CPLR 3213 motions. However, the decision leaves open the question of how much outside proof is too much or excessive for purposes of a CPLR 3213 motion. To avoid this potential issue, parties should either (i) avoid drafting any additional documents in connection with a promissory note; or (ii) make sure that any additional documents drafted in connection with a promissory note are drafted carefully to avoid a potential ambiguity.  

Baseball scoreboard against a beautiful sky.
Ray Shrewsberry, Unsplash

As my colleague, Matt Donovan, recently blogged, it is essential for litigants to “play[] nice in the litigation sandbox” or risk facing the ire of the Justices in the Commercial Division. Many litigants might think they are playing “nicely” by asserting “good cause” in their arguments. But what does it actually mean to have “good cause”? As illustrated by some recent decisions by Manhattan ComDiv Justice Robert Reed, a finding of good cause will depend on the circumstances, evidence, and respective law.

Case Spotlight #1: Designs by F.M.C. v. Unique First Ltd.  

In Designs, Justice Reed dealt with two motions seeking withdrawal as counsel. In assessing both motions, Justice Reed reiterated that an “attorney must demonstrate that good cause exists to end the relationship with the client.” Without showing good cause, a motion to withdraw will be denied.

In the first motion, Justice Reed granted withdrawal as there was sufficient evidence submitted to demonstrate that the attorney’s purported appearance for an entity was “caused by mistake.” The evidence showed that when the attorney appeared on behalf of the entity, he believed his client owned the entity and that he therefore was representing it. When the attorney learned during a deposition that this was not the case, he immediately moved to withdraw. Since there was no evidence that the entity wanted/authorized the attorney to represent it, Justice Reed found sufficient good cause.

Likewise, in the second motion, Justice Reed also found sufficient good cause to grant the motion to withdraw. In that motion, the attorney, by way of affirmation, submitted evidence that the client did not intend to cooperate with the attorney and wished to appoint new counsel. Accordingly, Justice Reed granted the motion to withdraw.

Good Cause: 1, Gamesmanship: 0.

Case Spotlight #2: In Subify LLC v. Ace Hat Collection, Inc.

In Ace Hat Collection, Inc., an attorney moved to withdraw because he ceased working for the law firm by which he was employed when the client initially retained him. The attorney represented that he could not contact the client after the change in firm and did not receive the client’s consent.

In denying this motion, Justice Reed looked to the law. He reasoned that the law required the attorney to give the client reasonable notice he was withdrawing from representation. Justice Reed found that the attorney submitted no evidence of this fact.

Further, Justice Reed looked to the factual circumstances of the case. Justice Reed detailed the lack of evidence put forth by the attorney that would show “an irretrievable breakdown in the relationship or failure of cooperation by the client in representation.” As such, Justice Reed held that there was no good cause and denied the motion.  

Good Cause: 1, Gamesmanship: 1.

Case Spotlight #3: Sumec Textile & Light Indus. Co., Ltd. v. Zee Co. Apparel Corp.

Finally, Justice Reed once again dealt with good cause, albeit under different circumstances, in Sumec Textile. The case dealt with a discovery dispute over whether the deposition of plaintiff’s representative should take place in New York or virtually.

Plaintiff’s counsel argued there was good cause for the deposition to be conducted virtually, as the witness resided in China, which would result in unduly burdensome expenses to the plaintiff. Plaintiff also argued that the witness was the principal caretaker for a young child and her elderly parents, thus making it difficult for her to leave China.

Defendant argued that mere inconvenience was not good cause to avoid the obligation to produce a witness for a deposition in New York. Defendant argued that it was defendant’s right to conduct the deposition in person, so that defendant could better assess credibility and present physical evidence relevant to the case.

Looking at the circumstances, Justice Reed ruled there was no good cause to warrant a virtual deposition. Justice Reed reasoned that plaintiff specifically chose New York as a venue and thus “could not reasonably argue to be aggrieved by the accompanying obligations.” Thus, absent good cause, Justice Reed held that the deposition must take place in New York.

Good Cause: 1, Gamesmanship: 2.

Takeaway

Although these cases found more gamesmanship than good cause, in reality there is no true scoreboard for a finding of good cause. As seen by Justice Reed’s decisions, a finding of good cause will vary given the circumstances.

However, litigants can take one thing to the bank — simply stating good cause will not be enough. When asserting good cause, litigants should strive to focus their arguments around relevant law and to submit sufficient factual evidence to support their position.

Alarm,Clock,On,Autumn,Leaves,Natural,Background

Having recently set our clocks back at the end of this year’s Daylight Savings Time, we here at New York Commercial Division Practice wanted to alert our readers to an upcoming, decidedly forward-looking NY Bar event.  On Wednesday, November 13, 2024, from 5:30 to 8:30 pm, the Commercial and Federal Litigation Section of the New York Bar Association will host an interactive event – Taking the Lead 2024: Empowering Women Lawyers in Commercial Cases; Winning Strategies and Techniques for Trial. The event will showcase women commercial litigators and will feature a mock trial presentation with opening and closing statements and direct and cross-examinations of witnesses, followed by a critique of the presentation by distinguished members of a judiciary panel.

The judiciary panel will consist of:

  • Hon. Judge Shira Scheindlin (ret.), Boies Schiller Flexner LLP
  • Hon. Judge Jessica Clarke, U.S. District Court Judge for the Southern District of New York
  • Hon. Judge Anne Donnelly, U.S. District Court Judge for the Eastern District of New York
  • Hon. Justice Anar Rathod Patel, Commercial Division of the Supreme Court of the State of New York, New York County
  • Hon. Justice Joseph Risi, Commercial Division of the Supreme Court of the State of New York, Queens County

The Taking the Lead event also will feature an awards ceremony for the presentation of the Hon. Shira A. Scheindlin Award for Excellence in the Courtroom, and the Hon. Judith S. Kaye Commercial and Federal Litigation Scholarship.  

First introduced in 2016, the Scheindlin Award is presented in November, on or around the date when women received the right to vote in New York State in 1917.  The Judith S. Kaye Scholarship was established with the goal of increasing the number of women prepared to serve as first chair in commercial litigation cases.  Both awards recognize female litigators who demonstrate excellence in commercial litigation and a strong commitment to mentoring junior attorneys in the legal community.

The Taking the Lead event will be held at the Daniel Patrick Moynihan United States Courthouse, Ceremonial Courtroom, in Manhattan. 

Below is a link to learn more about this program, including online registration:

Taking the Lead 2024: Winning Strategies and Techniques for Commercial Cases – New York State Bar Association

As one of the panelists, I am excited to be a part of this event and am looking forward to seeing you there!

Financial,Dispute,Occurs,When,There,Is,A,Disagreement,Over,Money

Under CPLR §§ 3111 and 3122(d), “[t]he reasonable production expenses of a non-party witness shall be defrayed by the party seeking discovery.” The Commercial Division Rules at Appendix A (“Guidelines for the Discovery of ESI”) define “reasonable production expenses” to include:

  1. Reasonable fees charged by outside counsel and e-discovery consultants;
  2. Reasonable costs incurred in connection with the identification, preservation, collection, processing, hosting, use of advanced analytical software applications and other technologies, review for relevance and privilege, preparation of a privilege log (to the extent one is requested), and production;
  3. Reasonable costs associated with disruption to the non-party’s normal business operations, provided such costs are quantifiable and warranted by the facts and circumstances; and
  4. Other costs reasonably identified by the non-party.

The Appellate Division, First Department, recently addressed the reasonableness of non-party production costs in the context of ESI discovery in Barons Media, LLC v. Shapiro Legal Group, PLLC, 2024 NY Slip Op 05301 [1st Dept Oct. 24, 2024]. The court considered the non-party’s motion for reimbursement of “reasonable production expenses” incurred while producing ESI pursuant to a subpoena issued by the petitioner, Barons Media, LLC (“Barons”). Under the Commercial Division’s ESI Guidelines, “reasonable production costs” may include reasonable fees charged by outside counsel and e-discovery consultants for gathering and reviewing documents for relevance and privilege before production, in addition to those charged by vendors involved in the harvesting and storage of ESI.

The Lower Court Decision:

The lower court (Manhattan Com. Div. Justice Joel M. Cohen) found that the non-party was only allowed two-thirds of its requested reimbursement costs. The non-party argued that all of its requested expenses were due under the Commercial Division’s Guidelines. Barons argued that the non-party’s claimed expenses, including its attorney’s fees, were inflated and were incurred by its own malfeasance in resisting discovery. The court found that, because Barons’ discovery requests were not “narrowly tailored to discovering information it could obtain only from [the non-party],” the non-party was entitled to two-thirds of its requested reimbursement costs. However, the court did not award the non-party the full amount requested, presumably in agreement with Barons that inflated costs and the cost of resisting discovery should not be included in the reimbursement.

The Appellate Decision:

On appeal, the non-party argued that it was due the full amount requested because each expense fell under the scope of the Commercial Division’s ESI Guidelines. The non-party submitted a detailed schedule based on invoices submitted by counsel and ESI vendors, reflecting that the costs were largely incurred by the review, organization, and compilation of responsive materials by outside counsel. Barons argued that the non-party cannot recover the costs associated with reviewing or withholding documents from production due to relevance.

Ultimately, the First Department determined that, after weighing “all relevant factors,” the lower court appropriately concluded that the non-party was only entitled to recover two-thirds of the claimed expenses. The court agreed with Barons that some expenses related to activities associated with withholding materials and found that the outside counsel’s billing rate “may have been unreasonable.”

Takeaway:

While Barons Media does not create new law, the First Department’s rationale for limiting the non-party’s recovery to two-thirds of the requested expenses is significant. The court’s statement that “insofar as some of the entries reflect activities associated with withholding materials” means that these costs, along with outside counsel’s potentially unreasonable billing rate, were the basis for awarding the non-party only two-thirds of its requested expenses. Consequently, attorneys for non-party witnesses should be aware that they may not be reimbursed for costs incurred from withholding information from the party seeking discovery. This should also be a warning for those requesting broad discovery from a non-party, as opposed to “narrowly tailoring” their requests to non-parties to avoid reimbursement fees.

Quick stop on a roadtrip
Tom Strecker, Unsplash

Every commercial litigator is familiar with the burdens at the discovery phase of litigation, whether it is a dispute over production, privilege, or just the sheer volume and cost (both time and money) associated. Be that as it may, discovery also serves a critical and necessary purpose in commercial litigation. Determining what to ask for and how to get it is an art, and a skilled litigator’s strategy for doing so can shape the conduct of litigation. 

Commercial litigators often are faced with interstate discovery. When so confronted, litigators will dust off each adopting state’s version of the Uniform Interstate Depositions and Discovery Act and employ the simple procedures applicable to those interstate courts to have deposition and discovery subpoenas issued to the out-of-state non-party.  

But what happens when the discovery sought is outside the territorial jurisdiction of the United States? The Commercial Division, as provided in South32 Chile Copper Holdings Pty Ltd. v Sumitomo Metal Mining Co., Ltd., et al., presided over by the Honorable Robert R. Reed of the New York State Supreme Court, New York County, Commercial Division have those instances covered via the Hauge Convention of 1970 on the Taking of Evidence Abroad in Civil Matters (the “Convention”).

The Dispute and Litigation

Plaintiff, South32 Chile Copper Holdings Pty Ltd. (“Plaintiff”), initiated an action against defendants, Sumitomo Metal Mining Co., Ltd. and Sumitomo Corp. (collectively “Defendants”), seeking to hold Defendants responsible for Dutch tax liabilities for Chilean gold mine operations that Plaintiff acquired as part of a transaction with Defendants.   

During the discovery phase of the litigation, Plaintiff moved the Court to obtain documents from the US affiliates of certain non-party entities in the Netherlands and the United Kingdom, each of which are alleged to have: (1) given tax advice regarding the Dutch tax liability; and (2) having relevant information surrounding the parties’ sale and purchase agreements that are purported to confer the Dutch
tax liability. Defendants also moved to obtain documents from a Netherlands entity which is alleged to have provided advice regarding the filing and preparation of the tax returns at issue, which led to the Dutch tax liability. Plaintiff’s discovery motions went uncontested. 

What Is the Hague Evidence Convention?

The Convention is a multilateral treaty signed by over 60 countries, which was designed to aid parties in seeking discovery from international non-parties via a system of signatory central authorities. In sum, a litigant in the New York Commercial Division seeking pre-trial discovery from a non-party in a foreign jurisdiction that is a member of the Convention can apply to the New York Court for issuance of a “Letter of Request for Judicial Assistance” (“Letter”) finding the discovery requests at issue to be sufficient for issuance of the Letter. The Letter is then submitted to a Central Authority of the signatory state where the evidence is located and, if in compliance with the Convention and the laws of the signatory state, will be executed by an authority within that signatory state. The executing authority will notify the parties subject to the discovery request and provide the opportunity to be heard.

What Must Be Considered by the New York Court? 

In South32 Chile Copper Holdings Pty Ltd., the parties sought tax documents and information from tax consultants that provided advice related to the Dutch tax liability.  Upon the requests of both parties, Justice Reed analyzed three different elements necessary to issue a Letter including: 

  1. That the “documents sought are both material and necessary to the legal claims in the matter” [citing Allen v Crowell-Collier Pub. Co., 235 NY2d 403 [1968]).
  2. “That ‘the method of discovery sought will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims’” [quoting Abrams v Pecile, 83 AD3d 527, 528 [1st Dept 2011] [internal quotation omitted]); and     
  3. “That the information sought is ‘crucial to the resolution of a key issue in this case’” [quoting Kahn v Leo Schacter Diamonds, LLC, 139 AD3d 635 [1st Dept 2016]). 

In analyzing these elements, Justice Reed found that the tax documents sought, or the advice procured by the non-parties, was central to the tax liability at issue. The Court held that the information sought by Plaintiff and Defendants was “crucial to the resolution of a key issue in the case” and therefore granted each of the motions issuing a Letter to each of the non-parties. 

The Takeaway

Though seemingly daunting, commercial litigators must keep in mind that discovery from outside the territorial jurisdiction of the United States is available, and that there is a tried-and-true process under the Convention for obtaining it. Parties need not forego obtaining crucial international discovery, and the Commercial Division can assist by issuing a Letter upon the requisite showing.

Group,Of,Kids,Playing,Outdor,In,Sand,With,Plastic,Toys

I think it’s fair to say that Commercial Division judges have little time for discovery disputes.  If one peruses the individual practice rules of many of the ComDiv judges, one typically finds language all but prohibiting discovery motions.  And ComDiv Rule 14, which itself provides that “[d]iscovery disputes are preferred to be resolved through court conference as opposed to motion practice,” expressly gives the judges the discretion to do so (“If the court’s Part Rules address discovery disputes, those Part Rules will govern discovery disputes in a pending case”).  If a particular ComDiv judge’s individual rules are silent on the matter, then the default rule in Rule 14 applies.  In which case, counsel are restricted to (i) making a good-faith attempt to resolve the dispute(s) amongst themselves; and (ii) if unsuccessful on their own, submitting competing letters outlining their respective positions and asking for the opportunity to conference the dispute(s) with the court. 

Commercial Division judges also have little time for attorney gamesmanship.  Again, the ComDiv Rules expressly support this sentiment, as one need look no further than the Preamble to the Rules, which was amended some five years ago to insist on, among other things, “that the practicing bar be held rigorously to a standard of commitment and professionalism of the highest caliber.”  This includes conduct at depositions. 

Continue Reading Playing Nice in the Litigation Sandbox

My colleague Matt Donovan recently wrote about the requirements of Commercial Division Rule 13(c) and highlighted certain decisions in which expert reports were precluded for non-compliance. This week’s post looks at a decision by newly-appointed Manhattan Commercial Division Justice Nancy M. Bannon, who denied a motion to preclude expert reports despite non-compliance with the rule. In the decision, Justice Bannon sheds light on the boundary between admissible and impermissible expert opinions, particularly when reports encroach on the court’s authority to opine on legal conclusions, while also imposing specific limitations on the expert’s testimony.

Background

In 2497 Realty Corp. v. Fuertes, the plaintiff sold a contaminated property to the defendant, which had been impacted by an oil spill from a nearby gas station owned by non-party, ExxonMobil. Plaintiff and defendant entered into an agreement under which the defendant agreed to take on property remediation and settlement negotiations with ExxonMobil, and the parties agreed on a distribution plan for any proceeds resulting from any settlement reached with ExxonMobil (the “Distribution Plan”).

ExxonMobil settled with the defendant in 2011, but three years later the plaintiff filed suit alleging that the defendant breached the contract by violating the Distribution Plan. The court (Justice Charles E. Ramos [Ret.]) stayed the action until the remediation process was completed. In 2022, when the plaintiff successfully established that remediation was finished, the case was restored to resolve the issue of whether, under the contract, the property was remediated to “its highest and best use under applicable zoning laws, as the [defendant] shall determine in its sole and absolute discretion.” The parties submitted expert reports regarding the remediation, including the plaintiff who submitted two reports.

Motion to Exclude Expert Reports and Testimony

The defendant moved to exclude the plaintiff’s environmental expert testimonies and reports, arguing that:

  • the reports contain impermissible legal conclusions that reach the ultimate issue;
  • the plaintiff’s experts lack qualifications to opine on the “highest and best use” of the property; and
  • the reports do not meet the disclosure requirements of Commercial Division Rule 13(c).

Justice Bannon denied the motion.

Scope of Expert Testimony

The court concluded that the experts’ opinions were well within their environmental remediation specialty, stating specifically:

“[the experts] do not opine on the issue of what is or is not the theoretical highest and best use of the Property. Rather, they opine on the environmental remediation of the Property—an appropriate issue for expert testimony that is within their area of expertise—taking as their starting point the First Department’s aforementioned analysis of the Contract’s terms, the Property’s current zoning for commercial use, and the defendants’ current use of the land for commercial purposes.”

Despite this conclusion, the court nonetheless observed that the defendant correctly pointed out that the plaintiff’s experts’ reports contained opinions that improperly delved into contract interpretation and legal conclusions, such as whether the remediation of the property was completed in accordance with the settlement agreement and the contract. The court ruled that the defendants may object to specific inquiries when justified, particularly concerning sections of the reports related to contract interpretation or legal conclusions. Ultimately, the court determined that experts are prohibited from testifying on matters of contract interpretation or purely legal issues and should exclusively focus on the environmental condition of the property.

Rule 13(c) Disclosure Obligations

The defendants also argued that the plaintiff’s experts’ reports failed to include their recent publications and experience as expert witnesses. The defendants also took issue with the joint authorship of the second report.

Under Commercial Division Rule 13(c), “expert disclosure must be accompanied by a written report, prepared and signed by the witness,” which must include:

(A) a complete statement of all opinions the witness will express and the basis and the reasons for them;

(B) the data or other information considered by the witness in forming the opinion(s);

(C) any exhibits that will be used to summarize or support the opinion(s);

(D) the witness’s qualifications, including a list of all publications authored in the previous 10 years;

(E) a list of all other cases at which the witness testified as an expert at trial or by deposition during the previous four years; and

(F) a statement of the compensation to be paid to the witness for the study and testimony in the case.

The court rejected the defendants’ arguments regarding the experts’ qualifications and alleged non-compliance with Commercial Division Rule 13(c). First, the court clarified that there is no prohibition against jointly-authored reports.  Second, the court emphasized that preclusion of expert testimony for non-compliance with Rule 13(c) is at the court’s discretion and noted that the defendants had not shown any prejudice resulting from the disclosure issues, particularly since the experts had already been deposed and questioned about their qualifications (see Taxi Tours Inc. v Go N.Y. Tours Inc., 227 AD3d 530, 531 [1st Dept. 2024]).

Upshot

While courts may not outright preclude expert reports, they can impose restrictions on testimony, particularly barring experts from addressing matters of contract interpretation or purely legal issues.

In addition, while experts must adhere to Commercial Division Rule 13(c) when submitting their reports, non-compliance does not always result in the exclusion of the expert’s testimony, as the court may exercise discretion to evaluate whether any potential prejudice has occurred.

Judges,Gavel,And,The,Word,"sanctions",On,A,White,Background

As readers of this blog are aware, the most contentious battles during a lawsuit are fought during discovery. Among the various discovery battles is scheduling depositions. In many cases, parties tend to reschedule depositions, which typically drags out the length of a litigation. The worst decision a party can make is failing to appear for a deposition. As a recent decision from Manhattan Commercial Division Justice Margaret Chan shows, New York courts will dispose of a case (i.e., striking of a pleading) for a party’s repeated failure to appear for a scheduled deposition.

In O’Rourke v Hammerstein Ballroom,  Defendants moved separately, pursuant to CPLR §§ 3124 and 3126, requesting several forms of discovery sanctions against Plaintiff, including (i) dismissal and/or striking of the complaint; (ii) precluding Plaintiff from offering testimony or evidence in support of his claims; and (iii) monetary sanctions, for Plaintiff’s repeated failure to appear at court-ordered depositions. Specifically, between November 19, 2021, to January 24, 2024, the Court held eight discovery conferences with the parties and scheduled Plaintiff’s deposition each time. However, Plaintiff failed to appear for each of his eight separate court-ordered depositions.

On or about May 1, 2024, the Court held a ninth discovery conference with the parties. During the conference, Plaintiff’s counsel advised the Court that certain “extrinsic issues” caused him and his firm to “continuously drop the ball.” As a result, the Court ordered the Plaintiff to appear for a deposition on or before June 28, 2024, and gave Defendants permission to file for sanctions should Plaintiff fail to appear.

Following the May 1, 2024, discovery conference, Plaintiff failed to appear for his deposition on two additional, separate occasions. As a result, on July 10, 2024, the parties appeared for a status conference, during which the Court advised Plaintiff’s counsel that Plaintiff had until the return of Defendants’ motion to appear for a deposition. Rather than appear, on August 1, 2024, Plaintiff filed his opposition to Defendants’ motion.

Analysis:

In its decision, the Court examined the standard for issuing discovery sanctions. Specifically, CPLR § 3126 (3)  provides that if a party “refuses to obey an order for disclosure or willfully fails to disclose information which the court finds ought to have been  disclosed pursuant to this article, the court may make such orders with regard to  the failure or refusal as are just,” including “an order striking out pleadings or parts  thereof, or staying further proceedings until the order is obeyed, or dismissing the  action or any part thereof, or rendering a judgment by default against the  disobedient party.” In addition, the Court noted that “[t]he drastic sanction of striking pleadings is justified only when the moving party shows conclusively that the failure to disclose was willful, contumacious or in bad faith” (Roman v City of New York, 38 AD3d 442 [1st Dept 2007], [citations omitted]).

In applying the standard under CPLR § 3126 , the Court held that the appropriate sanction for Plaintiff’s repeated failure to appear for a deposition was to dismiss Plaintiff’s complaint. Specifically, the Court stated that:

[P]laintiff’s counsel’s story is so wildly unrealistic that [it] can only imply that plaintiff was never ready for deposition on June 28 or any date and was never set to be prepared.  Plaintiff’s counsel’s actions and representations smack of gamesmanship, which this court does not condone. In view of plaintiff’s counsel’s lack compliance with the most recent order giving him one more opportunity to move this case forward, coupled with his longstanding non-compliance with nine orders equaling nine other opportunities to move this case forward, plaintiff’s counsel’s inaction shows the lack of seriousness in the prosecution of this case. The sanction befitting the lackadaisical handling of this case is dismissal of plaintiff’s complaint.

Takeaway:

The message from the O’Rourke decision, like dozens of other rulings, seems clear. The Commercial Division will enforce a strict, no-tolerance approach in disposing of cases for willful discovery violations. Against this background, a party’s repeated negligence, as in O’Rourke, will meet the criterion to strike a pleading under CPLR § 3126 (3). As such, counsel should heed the words of President Lincoln, who stated “[l]eave nothing for tomorrow which can be done today.”

Law,,Legal,Judgement,,Legistration,,Litigation,,Court,Verdict,,Judicial,System,And

As recently highlighted by this blog, on September 12, 2024, the Justices of the Commercial Division gathered in the offices of Kelley & Drye to discuss new updates and happenings in the world of the Commercial Division (“ComDiv”). The night was filled with lively discussion – leaving those fortunate enough to attend with valuable insights on key practice points within the ComDiv. Based on our desire to keep all our readers updated on all the happenings in the ComDiv, we would be remiss to not share with you some important takeaways and insights from this event.

Change in the ComDiv Monetary Threshold?

The ComDiv Justices led an intriguing discussion about whether or not the monetary threshold for the ComDiv should be raised. In true judicial fashion, the Justices were a split bench. Some Justices opined that an increase in the monetary threshold could allow the ComDiv to better utilize its resources to focus on more nuanced, complex commercial cases – cases for which the ComDiv was specifically designed. Other Justices felt that the current threshold was sufficient and should not be raised to bar deserving litigants from the resources of the ComDiv.  Although no change is imminent, it is clear that the monetary threshold is on the minds of these Justices.

Trials and ComDiv Rule 9(b)

The ComDiv Justices also led a discussion surrounding the various avenues litigants have in adjudicating their claims within the ComDiv. While taking pride in their ability to get trial dates on the calendar, the ComDiv Justices also took time to highlight the recently added ComDiv Rule 9(b). On consent of all parties, this rule allows litigants to appoint any person to act in place of the Court and “determine any or all issues” or “perform any act, with all the powers of the Supreme Court.” The Justices suggested that this rule could be an effective alternative for litigants and enhance the Court’s efficiency in the disposition of cases.

Ultimately, in deciding between these different paths, the ComDiv Justices stressed that the more practitioners can be realistic about their trial needs, the better they will be able to decide which course of action is best for their respective cases.

Interested in learning more about ComDiv Rule 9(b)? Check out our blog post about it:

Courtroom of the Future / AI Issues

The ComDiv Justices were also excited to discuss new and exciting technology that has helped shaped ComDiv courtrooms into “those of the future.” Specifically, the Justices highlighted NYSCEF’s virtual evidence room, an online space where parties can submit evidence and exhibits in preparation for trial. The Justices discussed how NYSCEF’s virtual evidence room has transformed courtrooms – making it easier to display and share evidence in trials. To learn more about the virtual evidence room, check out this link:

Despite these exciting technological advancements in the courtroom, the ComDiv Justices also warned about some potential dangers – specifically focusing on AI. The Justices discussed how AI could create evidentiary issues, especially with its ability to create “deep fakes” or enhance certain images. Although these issues have not yet substantively arisen in in the ComDiv, the Justices warned that these issues may be imminent.

ComDiv Justices’ Pet Peeves

Finally, the ComDiv Justices concluded the night by sharing their “pet peeves” when dealing with litigants. To nobody’s surprise, the ComDiv Justices were very excited (and prepared) to share these pet peeves. Here are a few things to keep in mind:

  • Make sure to read each Judge’s individual rules before appearing before them.
  • Do not overwrite – be clear, accurate, and concise in your filings with the Court.
  • Meet and confer.
  • Use your microphone while speaking in the courtroom.
  • Don’t submit affirmations or affidavits in place of briefs when making legal arguments.
  • Get your court reporter’s information.
  • Do not cite to the Justices’ cases, unless they apply.
  • Utilize your fact section – but do not overstate or convolute the facts.
  • Be prepared and professional.

Thank you to the ComDiv Justices and everyone who put together such an amazing event! We look forward to more in the future!