Search results for: "commercial division" and "benefits"

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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.

Annual,Report

As one might gather from the title of this blog, we here at New York Commercial Division Practice try to make a more-than-occasional point of extolling the virtues of the Commercial Division. From its well-established reputation as a sophisticated, cost-effective, predictable, and expeditious forum to its related ability to attract businesses nationwide to litigate their disputes in New York State, when it comes to litigating commercial cases in New York, the Commercial Division is the place to be.

Every year around this time, New York’s Chief Administrative Judge publishes an annual report, which “collect[s], compile[s] and publish[es] statistics and other data with respect to the unified court system and submit[s] annually, on or before the fifteenth day of March, to the legislature and governor a report of activities and the state of the unified court system during the preceding year.” The New York State Unified Court System’s 2023 Annual Report, which was just published last week, devoted a section to the Commercial Division under the heading “A Commitment to Society,” in which the Chief Administrator praised the work of the Commercial Division Advisory Council, which, under the leadership of Robert L. Haig, Esq., has helped develop the Commerical Division into becoming “a recognized leader in court system innovation, … demonstrating an unparalleled creativity and flexibility in [the] development of rules and practices.”

Continue Reading The Chief Administrative Judge’s 2023 Annual Report, the State of the Commercial Division, and Other ComDiv Goings-On
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As frequent readers of this blog are no doubt aware, the ten-volume practice treatise entitled Commercial Litigation in New York State Courts and edited by distinguished commercial practitioner Robert L. Haig (the “Haig Treatise”) – now in its 5th edition – is an invaluable guide for litigators navigating the inner workings of the New York State Court system.  With contributions by over 250 authors, the Haig Treatise is a must-have in every commercial litigator’s library, as it is chock-full with insights, strategies, and tactics essential to litigators and corporate in-house counsel alike.  With over 150 chapters, the Haig Treatise is a one-stop destination providing guidance on virtually every topic, procedural or substantive, that may arise in your commercial-litigation practice.

It’s no surprise that the Haig Treatise devotes an entire chapter to the topic of practicing before New York’s Commercial Division.  After all, Mr. Haig chairs the Commercial Division Advisory Council, whose primary purpose is to advise the Chief Judge of the State of New York on all matters related to the Commercial Division, and is one of the leading advocates for the Commercial Division as being among the premier business courts in the country – nay, the world.   

Chapter 39 of the Haig Treatise, entitled “Practice Before the Commercial Division,” is of particular interest to us here at New York Commercial Division Practice for obvious reasons.  Authored by the Hon. Brian M. Cogan of the EDNY and co-managing partner Alan M. Klinger of Stroock & Stroock & Lavan LLP, the chapter provides an all-fours summary for those who may be less familiar with practicing in the Commercial Division – including but not limited to issues related to eligibility for assignment, unique discovery rules, motion practice, ADR requirements, and confidentiality – much of which has served as blog fodder for us over the years.

But the Haig Treatise’s chapter on the Commercial Division also offers some unique practice insights worth expanding on here.  For example, the chapter spends a fair amount of time on the subject of forum shopping – particularly from the perspective of weighing the advantages and disadvantages of litigating in the Commercial Division as opposed to federal court, which for many years enjoyed preferential status among commercial litigators in the New York metro area. 

It’s common knowledge, of course, that plaintiffs’ counsel angle to commence suit in the forum expected to be most favorable to their clients.  Likewise, defendants’ counsel often take the opportunity to remove or transfer a case to a forum more favorable to their own clients.  On this, the authors of the ComDiv chapter suggest that the Commercial Division has “leveled the playing field” in the forum-selection game, and they provide invaluable strategic considerations for litigators when making this choice.

To be sure, since its inception in the mid-1990s, the Commercial Division has become a more attractive setting for business litigation in New York.  In fact, it has for many become the preferred forum for litigating complex business disputes.  The ComDiv chapter authors explain that one of the primary reasons for this is because of the expertise and sophistication of the ComDiv judges on all matters commercial.  As the preamble to the ComDiv Rules suggests, “the [Commercial] Division’s judges are chosen for their extensive experience in resolving sophisticated commercial disputes. Unlike jurists in other civil parts in New York’s court system, Commercial Division justices devote themselves almost exclusively to these complex commercial matters.”  This constitutes a legitimate counterpoint to a common argument in favor of litigating commercial disputes in federal court due to the business-law expertise of many of its judges, who often are appointed to the bench after having spent years litigating complex commercial matters at major law firms.

Another consideration weighing in favor of choosing to litigate before the Commercial Division as opposed to federal court is the comfort of knowing that, once commenced or transferred, your case will be heard by one of a select number of judges.  For example, for those looking to litigate in Manhattan, there are eight Commercial Division judges to whom your case could be assigned versus the approximately 50 SDNY district and magistrate judges sitting on Pearl Street or Foley Square.  Likewise, if you’re looking to litigate in or around Westchester County, you can be certain that your case will be assigned to one or the other of Commercial Division Justices Linda Jamieson or Gretchen Walsh versus the approximately 10 SDNY district and magistrate judges sitting on Quarropas Street in White Plains.

By the way, if you find yourself persuaded by the ComDiv chapter authors on this topic, Appendix C of the ComDiv Rules makes available sample forum-selection clauses, the express purpose of which “is to offer contracting parties streamlined, convenient tools in expressing their consent to confer jurisdiction on the Commercial Division.”

The authors of the ComDiv chapter also make a point of extolling the technological virtues of practicing before the Commercial Division – including, for example, the introduction of the next-gen “Courtroom for the New Millennium” and other innovative developments toward remote or virtual court participation.  

In 2004, long before the COVID-19 pandemic, the Supreme Court in New York County initiated a pilot program entitled “CourtCall,” which permitted attorneys to participate in certain court conferences telephonically.  Despite its obvious benefits – e.g., efficiency, expediency, cost-savings, etc. – the program didn’t gain much traction in the non-commercial parts.  The same can’t be said for the Commercial Division however.  As noted by the ComDiv chapter’s authors, “one legacy of the program [wa]s that the Commercial Division appear[ed] to have a greater degree of receptivity to the use of teleconferencing than in the non-commercial parts.”  

Such appearances no doubt have become realities over the last couple of years, as the Commercial Division has been compelled by the circumstances presented by COVID to make a massive pivot toward remote or virtual participation as a “new norm” for commercial litigation in New York – including, for example, new or amended rules on remote depositions, remote appearances, and virtual evidentiary hearings.   

As with many chapters in the Haig Treatise, the ComDiv chapter closes with some helpful practice aids, checklists, and forms – in this case specifically geared toward practicing in the Commercial Division – including ComDiv assignment and preliminary-conference forms, confidentiality stipulations, and much more.

In sum, chapter 39 of the Haig Treatise on practicing before the Commercial Division – as with the Treatise as a whole – is a well-organized, straightforward, and practical tool that all New York commercial litigators should have on their shelves.  

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 we all are acutely aware, during the last 21+ months, the normally slow-to-change practice of law has been thrust into overdrive, forcing lawyers and courts to quickly pivot from a largely in-person practice to virtual.

New York courts in particular have done an incredible job expanding access to litigants online by, among other things, expanding e-filing capabilities, conducting virtual appearances for conferences and oral arguments, encouraging remote depositions, and even conducting trials online. I’ve discussed with colleagues and adversaries alike the newfound efficiencies that have emerged out of the necessity caused by the COVID-19 pandemic.

New York’s Commercial Division, ever the agent of progress, keeps a good thing going with respect to virtual access. Just last week, on October 19, 2021, Chief Administrative Judge Lawrence K. Marks promulgated new Commercial Division Rule 36 (Administrative Order 299/2021), which will allow Commercial Division judges to conduct virtual evidentiary hearings and non-jury trials on consent of the parties.

In a memo published by the Commercial Division Advisory Council last June 2020, the Advisory Council advocated for this new rule (adopted in large part by AO/299/21). Among the benefits cited are the cost and time savings that virtual conference technology would bring. A global business hub, New York is the venue of choice for much commercial litigation around the country and around the world. Rule 36 will remove many of the obstacles in coordinating party, witness, lawyer, and court scheduling by largely reducing or eliminating the time and cost of necessary travel.

The public’s collective comfort with using video conferencing technology has only increased since the Advisory Council’s June 2020 memo. Having already incorporated such technologies into many other facets of the legal practice (i.e. “Zoom meetings”, remote depositions, etc.), expanding its use to evidentiary hearings and bench trials is not much of a stretch. Video conferencing technologies have only improved in efficiency and security after months of rapid development necessitated by stay-at-home orders, travel bans, and quarantine mandates from earlier in the pandemic (some of which still apply in certain jurisdictions).

It is important to note that Rule 36 requires the consent of all parties. Additionally, the Rule is permissive, not mandatory, meaning that even if all parties consent, ultimately the availability of virtual evidentiary hearings and non-jury trials lies within the Court’s discretion. This flexibility allows for the tailored application of video conferencing technologies to evidentiary hearings and/or bench trials where a virtual appearance would be appropriate.

Given the technological developments in this area over the past 21+ months, and given the encouragement by the judiciary, cost-savings to the client, and overall efficiencies promoted, I have no doubt that Rule 36 will be a welcome addition to practitioners who find themselves regularly practicing in the Commercial Division.

So, without further ado, we give you Commercial Division Rule 36:

Rule 36. Virtual Evidentiary Hearing or Non-jury Trial.

(a)        If the requirements of paragraph (c) of this Rule are met, the court may, with the consent of the parties, conduct an evidentiary hearing or a non-jury trial utilizing video technology.

(b)       If the requirements of paragraph (c) of this Rule are met, the court may, with the consent of the parties, permit a witness or party to participate in an evidentiary hearing or a non-jury trial utilizing video technology.

(c)        The video technology used must enable:

(i)        a party and the party’s counsel to communicate confidentially;

(ii)       documents, photos and other things that are delivered to the court to be delivered to the remote participants;

(iii)      interpretation for a person of limited English proficiency;

(iv)      a verbatim record of the trial; and

(v)       public access to remote proceedings.

(d)      This Rule does not address the issue of when all parties do not consent.

Rule 36 becomes effective as of December 13, 2021.

“Read before you sign”, is what we counsel our clients, since we all know that courts will bind one contractually to a signed agreement even if not read. But, what if you never signed the agreement? Can you still be bound by it?  In earlier blogs — here and here — we addressed this very issue where the courts will, under certain circumstances, bind parties to an “unsigned agreement”.  Now, we examine the latest decision out of the Commercial Division considering whether a non-signatory to an arbitration agreement can be bound to arbitrate.

In a recent decision, Justice Barry R. Ostrager addressed important contract principles, including when a party will be bound by a contract’s arbitration provision where the party did not sign the contract.

In 2004 Parker Family LP v BDO USA LLP, a group of investors brought causes of action based on third-party breach of contract, negligence, and aiding and abetting breach of fiduciary duty against auditors who had been retained by the hedge funds that plaintiffs invested in to audit the hedge funds’ financial statements.  Plaintiffs’ claims stemmed from the Engagement Agreements (“Agreements”) entered into only between the hedge funds and defendants.  Plaintiffs alleged that defendants recklessly issued clean audit reports and ignored the hedge funds’ grossly inflated value of investments, failure to pay redemptions, and improper related-party transactions.  Defendants’ negligence, ultimately, allowed the hedge funds’ management to continue its scheme to defraud investors and led to the funds’ ultimate collapse.

In bringing their motion to compel arbitration, defendants also relied on the Agreements, which contained an arbitration provision requiring any dispute “between the parties” to be resolved in arbitration. Although plaintiffs weren’t parties to the Agreements, Defendants argued that because plaintiffs, as non-signatories to the Agreements, alleged third-party beneficiary status under the Agreements in plaintiffs’ third-party breach of contract claims, plaintiffs should also be bound by the arbitration provision in those Agreements.

As a threshold issue, a court, not the arbitrator, decides whether a party is bound by an arbitration provision in an agreement that the party did not execute (KPMG LLP v Kirschner).

The New York Court of Appeals previously noted in Matter of Belzberg v Verus Investment Holdings Inc. that as a general rule in New York, nonsignatories are not subject to arbitration agreements.  However, this rule is not without exception.

For example, a nonsignatory can be forced to arbitrate based on a contract’s arbitration provision where the party “knowingly exploits” the benefits of the contract and receives benefits flowing directly from the agreement (MAG Portfolio Consultant, GMBH v Merlin Biomed Group LLC).  This is referred to as the direct benefits theory of estoppel.  However, where the party merely exploits the contractual relation of the parties, but not the agreement itself, the benefit is considered “indirect” and the nonsignatory cannot be compelled to arbitrate based on the contract’s arbitration provision (Matter of Belzberg).

New York federal courts have also relied on the direct benefits theory of estoppel.  Specifically, the Second Circuit has held that where the agreement at issue is the direct source of the benefit, a direct benefit to the party exists and arbitration required by the agreement must be imposed on the nonsignatory (Deloitte Noraudit A/S v Deloitte Haskins & Sells, U.S.).

Here, the Court, ultimately, determined that where plaintiffs expressly relied on the Agreement in asserting their Third-Party Breach of Contract claims against defendants, thereby alleging that defendants are liable to plaintiffs as “third-party beneficiaries” of the Agreements based on plaintiffs’ reliance on the audit reports in making investment decisions, plaintiffs were bound by the Agreements’ arbitration clause under the direct benefits theory of estoppel.  Thus, the Court severed all claims against defendants and directed that they proceed to arbitration.

Takeaway:  The direct benefit theory of estoppel and this decision have wide application for corporate and commercial litigation.  Potential litigants should be aware that they may be bound by a contract’s arbitration provision and cannot avoid it by simply asserting their “nonsignatory” relationship to the contract.

 

 

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The Commercial Division Advisory Council (the “Advisory Council”) has proposed three new amendments to the Commercial Division Rules: (1) a proposed amendment to Rule 1, which will allow counsel to participate in court conferences remotely, via Skype or other videoconferencing technology; (2) a proposed amendment to Rule 6, which will require proportionally spaced 12-point serif-type font in papers filed with the court; and (3) a proposed amendment to repeal Rule 23 (also known as, the “60-Day Rule”), which currently requires litigants to notify the court and other parties whenever a motion has not been decided within 60 days of its submission or oral argument.

The Proposed Amendment to Rule 1

The proposed amendment to Rule 1 will permit counsel to participate in court proceedings from remote locations via videoconference.  According to the Advisory Council, the proposed amendment “is consistent with the commercial division’s mission to improve efficiency and productivity, eliminate delays, and provide better service to the public” by, among other things, encouraging the avoidance of wasteful attorney travel.  The new proposed subsection (d) states:

Counsel may request the court’s permission to participate in court conferences and oral arguments of motions from remote locations through use of videoconferences or other technologies. Such requests will be granted in the court’s discretion for good cause shown; however, nothing contained in this subsection (d) is intended to limit any rights which counsel may otherwise have to participate in court proceedings by appearing in person.

The proposed amendment does not require counsel to participate in court proceedings from remote locations, and therefore avoids placing any burden on lawyers who lack the technical resources to participate from remote locations.  Moreover, the proposed amendment is limited to court conferences and oral arguments of motions, and is not intended to address the more complex subject of testimony by witnesses at trials or other evidentiary hearings.

Videoconferencing is not a novel concept in the Commercial Division.  Last year, my colleague Viktoriya Liberchuk reported on Justice Scarpulla’s implementation of videoconferencing technology in her courtroom, including the use of Skype for oral argument and other court conferences.  Videoconferencing is also frequently used in other courts, such as the United States circuit courts, and the First and Second Departments.  For example, the Second Department has installed Skype-equipped large screen computers in both its courtroom and consult room, and has started to use Skype for arguments of appeals and motions.

In fact, a Report of a Survey of Videoconferencing in the Courts of Appeals revealed that the benefits of videoconferencing may outweigh the disadvantages.  In that study, many of the appellate court judges who were interviewed cited the following advantages of videoconferencing:

  • Saves travel time and expense;
  • Allows for scheduling flexibility;
  • Reduces the administrative burden on the courts;
  • Decreases litigation costs;
  • Increases access to courts for marginalized litigants whose in-person appearance might otherwise be prohibitively expensive or constitute a hardship; and
  • Allows the court to make special accommodations for judges who may be ill or unable to travel.

Are there any disadvantages to videoconferencing?  Obviously some technical difficulties may occur.  But even so, technical difficulties are usually minor, easily resolved, and infrequent.  Other disadvantages may include decreased personal interactions and “quality of the argument experience.”  But, the judges who were interviewed indicated no difference in their understanding of the legal issues in arguments that were video conferenced.  In fact, one appellate judge even stated that “Videoconferencing is the wave of the future.”

Videoconferencing may prove to be convenient and cost-efficient for many litigators because it enables lawyers and their clients to save time and money.  In the words of the Advisory Council:

The proposed amendment presents an opportunity for the Commercial Division to continue its innovation and leadership in the smart adoption of technology in aid of the efficient administration of justice. The proposed rule confers sufficient discretion on individual Justices to permit participation in court proceedings from remote locations in a way that makes sense for their particular docket, and is calculated to avoid any burden or prejudice to the few lawyers who might not want to use this technology.

Proposed Amendment to Rule 6

A proposed amendment to Rule 6 of the Commercial Division Rules will require proportionally spaced 12-point serif type font in all papers filed with the court.  Rule 6 currently provides that all papers filed with the court shall comply with CPLR 2101 and 22 NYCRR 202.5(a), contain print no smaller than 12-point font, and footnotes no smaller than 10-point font.  But, like CPLR 2101 and 22 NYCRR 202.5(a), Rule 6 is silent as to the particular style of typeface.

Well, apparently some studies have shown that larger point typeface and use of proportionally spaced serif typeface enhances readability, improves comprehension and retention of long passages of text, and makes it easier for the eye to quickly and easily distinguish letters.  For those unfamiliar with typefaces, Serif typefaces are those that have little extensions, or “serifs” at the ends of the strokes of the letters.  By contrast, “sans-serifs” do not have the added stroke.  Some styles of proportionally spaced serif typeface include: Times New Roman, Century Schoolbook, Georgia, and Bookman.

According to the Advisory Council, larger point font and proportionally-spaced serif typeface “would assist the Commercial Division Justices and their staff in dealing with the arduous task of reading and retaining the content of tens of thousands of pages each year, which presumably would lead to greater efficiency.”

Proposed Amendment to Repeal Rule 23

The last proposed amendment to the Commercial Division Rules seeks to repeal Rule 23 in its entirety.  Rule 23, also known as, the “60-Day Rule,” currently requires movant’s counsel to notify the court and other parties whenever a motion has not been decided within 60 days of its submission or oral argument.  The Advisory Council proposes repealing this rule for three reasons:

  • First, the rule puts attorneys in the difficult and sometimes awkward position of reminding judges of their failure to render a decision and, therefore, is rarely followed;
  • Second, an analogous rule applicable more broadly in the Supreme and County court (see 22 NYCRR 202.8[h]) was rescinded in 2006; and
  • Third, most judges already receive notice of unresolved motions through other channels, such as the Office of Court Administration.

Those who wish to comment on these proposals should e-mail their submissions to rulecomments@nycourts.gov or write to: John W. McConnell, Esq., Counsel, Office of Court Administration, 25 Beaver Street, 11th Floor, New York, NY 10004.

Comments to the proposed amendment to Rule 1 must be received by September 30, 2019. Comments to the proposed amendment to Rule 6 must be received by October 25, 2019.  Comments to the proposed amendment to repeal Rule 23 must be received by November 1, 2019.

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As the name and subject matter of this blog would suggest, we here at Farrell Fritz are big fans of the Commercial Division. It’s where we practice. It’s what we know.

After all, we’ve been reporting on decisions coming out the Com Div on this and our other blogs for more than a decade – including in a post from way back in 2008, which urged New York commercial litigators to Get Thee to the Commercial Division!, in large part because of “the business-law expertise of its judges,” and because “the ability to tap such expertise, and to achieve a relatively fast resolution, is particularly useful to business owners.”

Last month, the Commercial Division Advisory Council issued a report entitled The Benefits of the Commercial Division to the State of New York, which, according to the Com Div’s What’s New news feed, explains how “the Commercial Division 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 Advisory Council’s report, itself, highlights a number of benefits of the Com Div to New York and its business community, including but not limited to attracting and retaining businesses to the state; generating tax revenues; providing jobs; and … wait for it … generating revenue for the NY legal community and its supporting vendors and suppliers.

The report notes how the Com Div promotes efficiency and productivity by reducing the amount of time and resources NY businesses spend on resolving disputes, and – apropos of the case-reporting we do here at New York Commercial Division Practice – how the Com Div benefits the NY business community by “developing a body of New York commercial law which enables businesses to predict the legal consequences of their business decisions and to thereby avoid having to go to court in the first place.”

Business-court benefits such as these have led to widespread expansion of such courts across the United States, Europe, and beyond. The Advisory Council’s report notes that since the inception of such courts in only three U.S. states in the mid-1990’s, more than 25 states now boast specialized business tribunals. Countries like Canada, England, Ireland, France, and the Netherlands have followed suit, generating robust competition at both the national and international level to attract complex commercial litigation and, in turn, revenue-generating businesses to one’s own locale.

According to the Advisory Council, this courtroom competitiveness “confirms the need, importance, and urgency of a thriving Commercial Division within the New York State Court system.” Put another way, “New York needs to compete with these other governmental entities if it is to continue to attract and retain businesses in New York.”

To be sure, we here at Farrell Fritz and New York Commercial Division Practice will continue to do our part in singing the praises and promoting the bona fides of the Commercial Division.  We urge our fellow commercial practitioners to do the same.

And so we say again:  Get thee to the Commercial Division!

Judge

At the New York City Bar Association the evening of February 25th, five recently retired justices of the Commercial Division—Hon. Eileen Bransten, Hon. Shirley W. Kornreich, Hon. Charles E. Ramos, Hon. Melvin L. Schweitzer, and moderator Hon. Carolyn E. Demarest—convened for a panel entitled “The Commercial Division: Past, Present and Future.” Here is a summary of some of the topics discussed by the panel:

History of the Commercial Division. Before the Commercial Division, commercial cases were heard in New York County’s Special Term, Part 1, a forum marked by chaos and disengaged justices. In Special Term, Part 1, there was no continuity and no monitoring of discovery. Opinions were generally drafted by the law department. Several of the panelists remarked that when they were in private practice, they had no faith that their clients would be treated fairly in Special Term, Part 1.

When it was first created, no judges were interested in sitting in the Commercial Division, as it had no rules and had not yet proved successful. Nowadays, by contrast, many view the Commercial Division as a stepping-off point to the Appellate Division. At a recent luncheon with judges from the Southern District, the federal judges complained that the Commercial Division was “taking all the good cases.”

Development of the Commercial Division Rules. The Rules began from discussions among judges about how to resolve certain common problems. The judges had similar, but not identical, part rules. Justice Ramos credited Robert L. Haig (who was in attendance, author of the exhaustive treatise on commercial litigation in New York courts) with creating uniform rules and then forming an advisory council. Justice Bransten emphasized that each new Rule is carefully considered and debated before it is enacted, going through multiple rounds of input from the advisory council, the chief counsel of court administration, board of judges, and public comment.

Effectiveness of the Rules. The panel generally agreed that the Rules have been effective because they allow individualism and flexibility to each part. For example, Justice Kornreich noted that the flexibility afforded by the Rules allowed her to make her procedures conform to the expectations of practitioners accustomed to the federal courts. The justices also discussed variations in their part rules concerning affidavits for direct examination and resolution of discovery disputes.

Common Mistakes Made by Practitioners. Throughout the evening, as well as in response to a specific question from the audience, the panelists shared the following tidbits of advice for attorneys in the Commercial Division:

  • Motions to dismiss should be utilized as much as possible, to clean the pleadings (and the scope of discovery) of non-meritorious claims, as well as to give the judge a “feel” for the case.
  • Unsolicited letters to the court should be avoided—if in doubt about whether a letter should be sent to chambers, ask the clerk in advance.
  • Preliminary conferences are an important opportunity to address the merits and educate the judge about the case, as well as to give the judge a sense of the potential usefulness of ADR.
  • Take care to read the Commercial Division Rules and Part Rules carefully. Justice Bransten believed that there should be stricter enforcement of the Rules.
  • Be aware of differences between federal and state procedural law, and do not confuse the two.
  • Take the court seriously—do not send in per-diem attorneys unfamiliar with the case.

Is the Commercial Division Elitist? The panel addressed this question last, and generally agreed that the Commercial Division was not elitist, although Justice Ramos conceded that it might appear so from the outside. Justice Schweitzer felt strongly that as the business center of the United States, if not the world, New York should devote extra resources to its commercial litigation courts to the extent necessary. Other benefits from the Commercial Division that justified its extra costs included:

  • The Commercial Division has made other Parts more efficient by not having to oversee trials of these matters;
  • High value cases attract higher-quality litigants who operate more efficiently and require less of the court’s time and resources;
  • The Commercial Division serves as a laboratory for creative solutions to issues affecting other courts; and
  • The Commercial Division does not really require so much extra resources—simply one extra clerk per Part.

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Tired of printing hundreds of thousands of documents and carrying numerous boxes of documents to court? The New York Commercial Division has heard your cry.  The New York Law Journal  reported that the Commercial Division courts are committed to utilizing technology to help make litigation efficient and more user friendly. The Commercial Division hopes to utilize innovative and advanced technology to efficiently adjudicate, among others, complex commercial matters. The benefits are bountiful as they will be valuable to lawyers, judges, and jurors.

In October, innovative technology made its debut in Justice Saliann Scarpulla’s courtroom in the New York County Commercial Division. In addition to Justice Scarpulla’s Part Rules, which require all cases be electronically filed and all documents text-searchable, Justice Scarpulla’s courtroom now contains an “86-inch screen to display documents, a podium with a document viewer and a USB port and small screens for attorneys and the judge.”   The new 86-inch screen permits attorneys to highlight and mark up documents. It also allows attorneys to scan documents while at the podium during trial, which helps to avoid unnecessary emergencies and courtroom delays.  Additionally, in an effort to protect client confidentiality, the courtroom contains a separate USB port for attorneys to use if their documents are highly sensitive so that they cannot be accessed through the court’s Wi-Fi. This new technology also permits attorneys to attend conferences via Skype, thus conserving time and expense.

In addition to the 86-inch display screen, the jury box in the courtroom was expanded and is now wheelchair accessible and offers technological assistance to jurors who are hearing or vision impaired. Similarly, jurors will no longer be inundated with reams of documents, as this new technology permits attorneys to provide jurors with a flash drive to access and review the documents in a more efficient matter.  In that regard, Justice Scarpulla stated that “we can promise a juror that they’re not going to be here for six months looking through documents.”  All of these technological improvements will undoubtedly have a positive effect on the willingness of people to serve as jurors and significantly impact efficiency in the courtroom.

“We think it’s important to have the right technology to give the business community in New York the sense that we could compete with the best courts in the world,” Justice Scarpulla opined.  Justice Scarpulla’s courtroom is the first, of what will hopefully be many New York courtrooms, to utilize this innovative technology that will make New York courts a much more desirable venue to handle complex commercial disputes.

The Commercial Division has initiated other changes that reflect its efforts to increase efficiency through technology.  For example, the Commercial Division promulgated Rule 11-e(f), which went into effect on October 1, 2018, encouraging parties to “use the most efficient means to review documents, including electronically stored information.” This new Rule, which addresses the use of technology-assisted review in the discovery process was discussed at length in Kathryn Cole’s blog, titled Important Update for Those Who Practice in the Commercial Division of the NYS Supreme Courts.

As technology pervades the legal profession, it is crucial that practitioners stay current with the changing technological landscape moving forward. Make sure you stay up-to-date with judge’s part rules and changes in the Commercial Division that we are certain to see in the future.

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