Discovery

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As readers of this blog have come to appreciate, we here at New York Commercial DCheck the Rulesivision Practice tend to report on — among other things Commercial Division — the procedural particularities of litigating commercial matters before the various judges that have been assigned to the Commercial Division over the years.  Such particularities may arise from, say, a new or amended Commercial Division Rule, or from a new or amended Individual Practice or Part Rule.

For example, we repeatedly have reported on the particularities of the individual-practice rules of Manhattan Commercial Division Justice Eileen Bransten, who, along with her colleague Justice Charles E. Ramos (also no stranger to this blog), will be retiring this month and will be succeeded next year by incoming Justices Joel M. Cohen and Andrew S. Borrok.  In case you missed it, the New York Law Journal announced the appointments of Justices Cohen and Borrok to the Commercial Division just before Thanksgiving.

Speaking of procedural particularities and new Commercial Division judges, perhaps most particular of all are the Practices for Part 54 overseen by New York County’s most recent addition to the Commercial Division, Justice Jennifer G. Schecter, who was appointed in April 2018 and took over the docket of recently-retired Manhattan Commercial Division Justice Shirley Werner Kornreich.

Justice Schecter’s Part Rules are numerous and specific — 58 if you’re counting (not including subparts) — and cover everything from file to trial.  Her rules seemingly anticipate anything that can arise during the course of a complex commercial litigation in a way that only someone who spent more than a decade as Principal Law Secretary to former Chief Judge Judith Kaye of the New York Court of Appeals and the aforementioned Justice Bransten can appreciate.

To be sure, there is much to consider in Justice Schecter’s rules, but here are 10 or so important reminders for practitioners litigating in her Part:

Rule 21 — Don’t ask your assistant or paralegal to call the court to confirm scheduling, etc.  “The court will only take calls from the parties’ attorneys of record.”

Rule 27 — Don’t dump documents on your adversary after hours.  “[W]hen a discovery deadline is set forth in a court order, that deadline is 5:00 pm, New York time.”

Rule 31 — Don’t withhold documents on the basis of privilege without serving a privilege log along with your production.  “Failure to serve a privilege log with the party’s production will, absent good cause, be deemed a waiver of the party’s objection on the ground of privilege.”

Rule 33 — Don’t send a colleague to a status conference without full knowledge of the case.  “Attorneys appearing for conferences must be fully familiar with the case [and] should be prepared to discuss the merits of their case at all conferences.”

Rule 34 — Bring everything with you to compliance conferences if you want the court to rule on a discovery dispute.  “Any party that wants to resolve a dispute about the sufficiency of a discovery response during a conference shall bring whatever will be needed to obtain a ruling, including copies of the disputed demands and responses.”

Rule 39 — Adhere to new Commercial Division Rule 17 concerning word limits and swear to it.  “Every brief, memorandum, affirmation, and affidavit shall include . . . a certification by the counsel who has filed the document describing the number of words in the document.”

Rules 40-41 — Don’t file an attorney “brief-irmation” or a party “brief-adavit” in support of a motion.  “Argument must be confined to the brief,” which “must accompany every motion.”

Rules 45 and 52 — Include complete copies of all contracts filed as exhibits to your motion papers.  “Excerpts of contracts may not be filed.”

Rule 54 — Agree with your adversary on a joint Rule 19-a statement of material facts or don’t bother.  “If the parties cannot agree on a joint statement, a Rule 19-a statement of facts is not permitted.”

Rule 55 — Obtain and file your oral-argument transcripts if you want a decision on your motion.  “Motions will not be marked fully submitted and the court will not issue a decision until the transcript is e-filed and the Part Clerk receives a hard copy of the transcript with the e-filing confirmation receipt.”

Be sure to check in early next year for future posts on the individual practices of incoming Manhattan Commercial Division Justices Cohen and Borrok.  In the meantime, a happy holiday season to all our readers!

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As litigators in the Commercial Division, everyone knows that discovery can be particularly burdensome and time consuming.  This is especially true when you have clients that are very protective of their information.  The Commercial Division already has anticipated this by offering attorneys a model confidentiality agreement, which in some cases can be further negotiated by the parties for their additional protection.

In Callsome Solutions Inc. v. Google Inc., the parties, as Google would come to regret, included an Attorneys’ Eyes Only (“AEO”) provision in their confidentiality agreement.  Manhattan Commercial Division Justice Andrea Masley scolded and sanctioned Google for its AEO designation of hundreds of documents and thousands of lines of deposition testimony.  The Court stated that the “AEO designation was reserved for truly secret documents” and that it should be used “as sparingly as possible.”  This is because “improper designations, not only delay, but also impact. . . the communications between [client] and its attorney.”   Therefore, in designating documents AEO, litigators must take careful consideration to limit the documents with that designation and make sure those documents are only designated in good faith.

In Callsome, the parties entered into stipulated confidentiality agreement that called for two tiers of confidentiality: (1) confidential; and (2) highly confidential – attorneys’ eyes only.   The latter designation was designed to protect confidential information that is “extremely sensitive.”  After Google designated hundreds of documents and thousands of lines of deposition testimony, the plaintiff requested that Google de-designate groups of documents and testimony, Google then engaged in a “slow trickle” of de-designation.

In issuing sanctions against Google, it was not just Google’s over-designations that irritated the court, it was also the “slow trickle” of corrections.  Specifically, the Court found that this “trickle” did not “rectify the initial improper designations.”  Further, Google even attempted to use the corrections as a negotiation tactic within the litigation, attempting to extract concessions from the plaintiff.  The Court found that “[n]o public policy is served by crediting Google’s purported offer to compromise. . .” because “AEO designations are not negotiable.”

A party cannot over designate documents then hold the improperly designated documents hostage until the adversary surrenders.  Such conduct will not be countenanced by this court.

The Court held that “Google’s conduct flouts widely accepted rules of civility embedded in New York litigation and in particular the Commercial Division,” and that it “effectively prevented the expeditious resolution of this litigation.”  The Court further held that Google engaged in frivolous conduct warranting sanctions under 22 NYCRR Section 130-1.1.

The first takeaway here is that confidential designations of any kind, particularly AEO designations should be made in good faith.  Second is that after designating documents AEO, when faced with a request to de-designate, you should ensure that you do not delay the litigation by refusing to do so or attempt to use your designations as a negotiating tactic.  Make sure you have a good faith basis for your designation, and stick to your guns.

 

However, if you believe that a document does not warrant such designation, but your client is still skittish, you can, as the Court suggested, amend (or draft) the confidentiality agreement to guarantee your client further protections such as providing for financial penalties in the event of a breach.  Over designation only delays litigation and shifts the burden to your opponent, which is never appropriate.

court rules

Over the past year or so, we have made a point of highlighting in the “Check the Rules” series on this blog periodic updates to the individual practice rules of certain Commercial Division Justices, including Justice Eileen Bransten in New York County (twice, in fact), Justices Marguerite A. Grays and Leonard Livote in Queens County, and Justice Sylvia G. Ash in Kings County.

Continuing with this theme of local-rule vigilance, Commercial Division practitioners should take note some recent changes to the individual practice rules of Manhattan Commercial Division Justice O. Peter Sherwood.

Justice Sherwood’s Practices for Part 49, which were revised as of this month, provide some notable additions (and omissions) from his prior rules, which dated back to May 2014 before most of the Commercial Division Advisory Council’s new-rule proposals and amendments were adopted and implemented.

Be Prepared, Be Authorized. Justice Sherwood opens his practice rules with an express and emphatic reminder to attorneys practicing in his Part of the requirements under Rule 1 of the Commercial Division Rules that “counsel . . . must be fully familiar with the case . . . and fully authorized to enter into agreements, both substantive and procedural, on behalf of their clients.” In other words, appearing in Part 49 is no “cattle-call.” Attorneys should have factual command of their cases, as well as the requisite authority to bind their clients.

Separate and Describe Your Exhibits. Justice Sherwood now requires attorneys practicing in his Part who wish to annex exhibits to their correspondence or motion papers to separately e-file their exhibits and designate them with a “descriptive title.” In other words, a simple designation of “Exhibit A” won’t cut it. Attorneys must provide a description (e.g. “Operating Agreement, dated as of September 20, 2018”) so that adversaries and court personnel viewing the docket or other notice of filing can immediately understand what has been filed.

Get Advance Permission to Adjourn Appearances. Justice Sherwood now requires that requests for adjournment be submitted a full two business days in advance of the scheduled appearance. Justice Sherwood conferences his cases on Tuesdays, so that means attorneys must get their requests for adjournment in by no later than Thursday of the prior week.

Check Your E-Mail. Justice Sherwood’s new rules provide that the court may choose to communicate with counsel via e-mail “regarding scheduling matters or to make certain inquiries.” Note, however, that this line of communication only goes one way. It does not mean that attorneys practicing in Part 49 may “initiate communication with the court via email” or “use e-mail to make arguments.”

Complete Party Discovery Before Bothering Non-Parties. Justice Sherwood “strongly encourages” attorneys practicing in his Part to “attempt to confine their requests to parties to the action and resort to third-party disclosure only when it reasonably appears that the information being sought is otherwise unavailable.” Justice Sherwood also requires that all non-party subpoenas be “simultaneously served” on all parties, and that all documents and information produced in response be exchanged among all parties within five days of receipt.

Follow Instructions When Seeking to File Under Seal. Justice Sherwood’s updated practice rules provide specific instructions concerning the filing of documents under seal:

  • Applications to file under seal must be made by Order to Show Cause, which must be preceded by a meet-and-confer regarding the documents proposed for seal.
  • Motions will be considered in light of the limitations imposed under applicable case law, and the movant must propose redactions “as opposed to wholesale sealing.”
  • Any document proposed for seal must be filed in its original, un-redacted form as an exhibit, with the proposed redacted version filed “as a subset of that exhibit.”
  • All motions must be accompanied by a joint index of the documents proposed for seal, including the basis for sealing and any objection thereto.

Finally, as for notable omissions, Justice Sherwood appears to have dispensed with his former requirement – which, as far as I’m aware, was entirely unique to his Part – that  motion submissions also be provided to the court “in .rtf format on a computer disk.”

**Nota Bene** – Attention Kings County Commercial Division practitioners: How much is your case worth? The general practice rules for the Kings County Commercial Division also were updated this month to double the monetary threshold from $75,000 to $150,000.

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So you entered into a Preliminary Conference and a Compliance Conference Order with your adversary whereby the parties have to exchange discovery by dates certain. The purpose of these orders is to save parties a significant amount of time and money and to move along litigation. However, when a party repeatedly fails to comply with the orders, one may seek an order of preclusion and to strike the other party’s pleading, right?  CPLR 3126(3) provides the aggrieved litigator with just the tool:  motion to strike the other side’s pleading.  Are they successful?  Sometimes!

Recently, in PAL Environmental Services, Inc., v. LJC Dismantling Corp., the Justice Marguerite Grays denied Plaintiff’s motion to strike Defendant’s answer based on Defendant’s repeated failure to provide complete and sufficient discovery responses. There, Plaintiff and Defendant entered into a Preliminary Conference Order, Compliance Conference Order, and a stipulation directing the production of certain material documentation pertaining to the breach of contract action. Although the Defendant was delinquent in producing the requested discovery responses pursuant to the discovery orders, it finally produced documents in accordance with the dates set forth by the stipulation. Nevertheless, Plaintiff deemed these responses “incomplete.” As such, Plaintiff moved pursuant to CPLR 3126(3) to strike the Defendant’s answer for failure to comply with the terms of the stipulation. Although the Supreme Court denied the motion, Plaintiff successfully moved for leave to renew, granting Plaintiff’s motion to strike the delinquent party’s answer. Not surprisingly, the Queens County Supreme Court held that Defendant’s repeated failure to comply with the terms of stipulation constituted “willful and contumacious” conduct.

However, upon Defendant’s appeal of the decision, the Second Department reversed, finding that public policy favors the “resolution of actions on the merits whenever possible” and that striking a pleading is not warranted absent a showing that the failure to comply with discovery is “willful and contumacious.”  Thus, the court resuscitated Defendant’s answer, breathing life back to the case, since there was very little evidence demonstrating that the failures to respond to discovery were “willful, deliberate, or contumacious.”  The court relied on another recent Second Department case, Henry v Datson, which held that the decision whether to strike a pleading for failure to comply with “court-ordered disclosures lies within the sound discretion of the trial court.”

“Well”, you say, “has the Appellate Division ever upheld the striking of a pleading under CPLR 3126(3)?”  You bet.  Indeed, in Studer v. Newpointe Estates Condominium, the Second Department upheld the strike where the court found repeated delays in complying with the demands and the court’s schedule, coupled with the inadequacy of the responses and the lack of an adequate excuse for the delays, gave sufficient evidence of willful and contumacious conduct that Supreme Court was well within its discretion to strike the answer.

 

Takeaway: Not all “repeated discovery failures” lead to the striking of a pleading — something considered a drastic remedy.  The failures must be shown to be “willful and contumacious,” meaning, more than mere negligence.  Repeated negligence does not seem to meet the criterion to strike a pleading under CPLR 3126(3).

“The expert discovery rules are promulgated so no party will be ‘sandbagged’ or surprised by another expert’s opinion” – Manhattan Commercial Division Justice Eileen Bransten

Several weeks ago, we reviewed some of the newer Commercial Division Rules and reported on a couple of recent decisions from Justice Shirley Werner Korneich of the Manhattan Commercial Division applying one of those Rules, Rule 11-c, concerning nonparty electronic discovery.  We follow up this week as promised with a look at another recent new-rule application from the same court.

Earlier this year, Justice Eileen Bransten, whose similarly-insightful decisions also are regular fodder for this blog, addressed issues concerning expert disclosure under Commercial Division Rule 13(c) in Singh v PGA Tour, Inc.Sandbagger

In Singh, the plaintiff, a professional golfer and member of the defendant PGA Tour, sued the Tour alleging that he had been humiliated by an arbitrary administration of the Tour’s anti-doping program and that the Tour wrongfully withheld his prize monies.  Singh had used a product called “deer antler spray” between seasons to address knee and back problems.  Sports Illustrated later posted an article about the spray on its website, referencing Singh’s use and suggesting that he had used it in violation of the Tour’s drug policy.  Singh responded by providing the Tour with a bottle of the spray for testing.  The initial results were negative for steroids but positive for a separate prohibited substance called “IGF-1.”  The Tour suspended Singh and held his 2013 prize money in escrow.  Singh challenged the Tour’s determination in arbitration.

The World Anti-Doping Agency, from which the Tour adopted its list of prohibited substances, subsequently determined that deer-antler spray was not a prohibited substance.  As a result, the Tour dropped its disciplinary action against Singh, and the arbitration was discontinued on the eve of the hearing.  Singh then sued the Tour in the Manhattan Commercial Division.

In the course of expert discovery in the Supreme Court action, Singh submitted a second, expert “reply report,” which the Tour challenged under Commercial Division Rule 13(c) as “impermissibly including new opinions which were not included in the first report.”  Specifically, Singh’s expert reply contained certain newly-obtained “consumer data” leading Singh to conclude that the “Tour suspension reduced the favorable criteria that marketing executives would use in their decision-making process in evaluating Singh’s viability as a spokesperson/endorser/advocate.”

Rule 13(c) mandates that an expert report contain, among other things, “a complete statement of all opinions the witness will express and the basis and the reasons for them,” as well as “the data or other information considered by the witness in forming the opinion(s).”  Quoting from The Chief Judge’s Task Force on Commercial Litigation in the 21st Century, Justice Bransten noted in her decision that “this rule was promulgated in an effort to harmonize the disclosure rules of our state and federal courts,” and that the Commercial Division looks to the Federal Rules of Civil Procedure “for guidance on expert disclosure issues.”  Federal Rule 26(a)(2)(B) mandates that an expert report contain the same statement, data, and information cited above, and Federal Rule 37(c)(1) provides that if a party fails to do so, “the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at trial.”

Justice Bransten granted the Tour’s motion to strike Singh’s expert reply, finding that “the new analysis, information, opinion and data contained within Plaintiff’s Reply Expert Report violates Commercial Division Rule 13(c) and FRCP 26.”  Noting the “egregiousness of the belated disclosure,” Justice Bransten cautioned Commercial Division practitioners that Rule 13(c) does not provide for “an opportunity for a party to ‘correct’ the deficiencies and omissions made in an initial expert report — including addition of new data and opinions, particularly when that data was available to the expert at the time the initial report was issued” or for an expert “to say what he neglected to say in his opening report.”

The rules of golf prohibit a player from “sandbagging” or deceiving others about their knowledge, intentions, and abilities.  As Justice Bransten’s recent decision in Singh v PGA Tour, Inc. makes clear, the same goes for the Commercial Division Rules regarding expert disclosure.

**Nota Bene** – Readers interested in hearing from Commercial Division Justices directly on lessons to be drawn from the implementation of some of these new rules and rule-changes should register for the upcoming Bench & Bar Forum sponsored by the NYSBA Commercial & Federal Litigation Section.  The program, entitled “True Innovation and Efficiency: New York County Commercial Division Justices Discuss the Success of the New Commercial Division Rules,” is scheduled for the evening of November 27th at Foley & Lardner LLP.

As we have come to expect, the Commercial Division Advisory Council periodically makes recommendations to amend and/or supplement the Rules of the Commercial Division, many of which are eventually adopted following a solicitation process for public comment by the Office of Court Administration.

In 2015, as a host of new Commercial Division rules and amendments were being rolled out, the NYSBA Commercial and Federal Litigation Section sponsored several panels throughout the metro-area to discuss the impact of the new rules on the various county bar associations.  At the time, Commercial Division practitioners and judges alike were still figuring out how and under what circumstances the new rules – concerning, among other things, interrogatory limitations, categorical privilege logs, nonparty electronic discovery, and expert disclosure – would be applied in their cases.  It’s been a couple years, so let’s take a look at some recent decisions to see how some of these rules are being applied.

Manhattan Commercial Division Justice Shirley Werner Kornreich, whose thoughtful decisions are no strangers to this blog, has at least twice this year addressed Commercial Division Rule 11-c concerning nonparty electronic discovery.  Under Rule 11-c and the corresponding guidelines found in Appendix A to the Rules of the Commercial Division, “[t]he requesting party shall defray the nonparty’s reasonable production expenses” – including, for example, “fees charged by outside counsel and e-discovery consultants” and “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 . . . , and production.”

Recently, in Gottwald v Sebert, Justice Kornreich addressed Rule 11-c in the context of a motion to compel production of documents by a nonparty public-relations firm hired by pop star, “Kesha” Sebert, in connection with her allegations of sexual assault, battery, and harassment against her former manager and producer, “Dr. Luke” Gottwald.  Justice Kornreich granted Dr. Luke’s motion, assessing any burden on the PR firm as “minimal,” given that “hit count caps can be used to keep costs reasonable”; that hit counts for the limited time period in which the firm was involved “should be minimal or nonexistent”; and that Dr. Luke “must reimburse [the firm] for the reasonable costs of . . . review[ing] documents for responsiveness to the subpoena, and log[ging] those that are purportedly privileged.”

Earlier this year, in Bank of NY v WMC Mtge., LLC, Justice Kornreich addressed Rule 11-c in the context of motions to quash nonparty subpoenas in a RMBS put-back case.  In denying the motions, Justice Kornreich similarly assessed the burden on the nonparties as “relatively minimal,” given that the defendant serving the subpoenas “will have to defray the [nonparties’] reasonable document collection, review, and production costs, including certain legal fees.”

Justice Kornreich also addressed Rule 11-b (b) concerning the “categorical” versus “document-by-document” approach to logging of privileged materials in Bank of N.Y. Mellon.  Under Rule 11-b (b) (1), specifically, the Commercial Division had expressed a “preference . . . for the parties to use categorical designations, where appropriate, to reduce the time and costs associated with preparing privilege logs.”  Referencing the parties’ prior meet-and-confer on the subject, Justice Kornreich ruled that “a categorical privilege log, in the first instance, will be employed for the sake of cost efficiency,” and that once the defendant serving the subpoenas “is made aware of the hit count totals associated with the [nonparties’] privilege designations,” it may then “elect . . . to pursue such purportedly privileged documents in light of the legal fees necessary to do so.”

Be sure to check back in a few weeks when we take a look at a couple more recent decisions applying some of these newer Commercial Division rules.  In the meantime, Commercial Division practitioners, particularly those on the receiving end of a nonparty subpoena seeking ESI, should be mindful that the rules defraying the costs of e-discovery appear to have minimized the effect of the commonly-asserted “unduly burdensome” objection.