A recent decision from the Manhattan Commercial Division reminds us that although punitive damages are generally not recoverable in New York, certain circumstances require that they be awarded.

In Hall v Middleton, Manhattan Commercial Division Justice Jennifer G. Schecter granted a $1 million punitive-damages award against defendant Middleton due to the presence of such circumstances.

Veritaseum, Inc. (the “Company”) is a financial technology company that uses blockchain-based markets to permit transactions between individuals. During initial conversations between plaintiff Charles Hall (“Hall”) and the Company’s CEO, Reggie Middleton (“Middleton”), Middleton made representations to Hall concerning the Company’s pending patent applications for proprietary technology concerning the use of block-chain technology and cryptocurrencies for the execution of smart contracts, to entice Hall to invest in the Company. Middleton represented to investors that the Company had pending patent applications, causing them to believe that they would be investing in a company that would eventually own the patents.

Hall commenced the action derivatively on behalf of the Company against Middleton for breach of his fiduciary duties to the Company by misappropriating the Company’s assets, including its intellectual property.

After trial, the Court found that Middleton “breached his fiduciary duty of loyalty to the Company by diverting ownership of the patents to himself.” Justice Schecter further determined that the Company (and not Middleton) should have owned the patents and thus other entities’ use of the patents would entitle the Company (and not Middleton) to a licensing fee.

During trial, Middleton argued that, despite the fiduciary relationship between the parties, there need not be trust in cryptocurrency transactions because such transactions are inherently “unbreakable promises.” The Court disagreed, stating that there is a need for trust among fiduciaries. The Court further noted that when trust is flagrantly violated, “there must be real, meaningful consequences to ensure that it doesn’t happen again. Anything short of significant punitive damages would further, not thwart, duplicity.”

To be entitled to punitive damages, “a defendant’s conduct must be directed at the public generally” (see Sherry Assocs. v Sherry-Netherland, Inc., 273 A.D.2d 14, 15, 708 N.Y.S.2d 105 [1st Dept 2000]). Punitive damages are intended as punishment for gross misbehavior for the good of the public and to deter the defendant from repeating the wrongful act (see Le Mistral, Inc. v Columbia Broad. Sys., 61 AD2d 491, 494–95 [1st  Dept 1978]).

In Hall, the Court determined that because Middleton clearly breached his fiduciary duty of loyalty to the Company, he may be held liable for punitive damages “regardless of whether his conduct was aimed at the public generally.” The Court noted that Middleton’s behavior impacted the public because he solicited investments from the public based on his misrepresentations concerning the Company’s ownership of the patents as well as conducted an illegal initial coin offering that resulted in the SEC issuing a consent order, thus destroying the value of the Company.  Justice Schecter further determined that:

Punitive damages are warranted because Middleton’s diversion of assets in breach of his fiduciary duty to the Company was intentional and deliberate, the related securities-law violations constitute aggravating and outrageous circumstances and his attempted scheme to effectively steal the patents for himself was impelled by a fraudulent motive.

In ultimately deciding that the plaintiff was entitled to punitive damages, the Court considered that the SEC had ordered Middleton to pay more than $8 million in disgorgement and a $1 million penalty. Thus, the Court held that a $1 million punitive-damages award was “justified.”

Although punitive damages are rarely awarded in New York, practitioners should take note that the Commercial Division is not afraid to grant such remedies when circumstances, like those on display in Hall, require them to.

A recent decision from Justice Robert Reed of the Manhattan Commercial Division in J.P. Morgan Ventures Energy Corporation v. Miami Wind I, LLC, Goldthwaite Wind Energy LLC demonstrates how parties have the ability to excuse contractual non-performance in a well drafted force majeure clause.


Plaintiff J.P. Morgan Ventures Energy Corporation (the “Buyer”) is an energy trading company. Defendants Miami Wind I, LLC (Miami Wind) and Goldthwaite Wind Energy LLC (Goldthwaite Wind) (collectively the “Sellers”) own windfarms in Texas. The Sellers executed hedge agreements (“Agreements”) with the Buyer. The Sellers were unable to sell and deliver the bargained for quantity of energy to the Buyer from February 13, 2021 through February 19, 2021, a period in which Winter Storm Uri caused below-freezing temperatures in Texas. As such, the issue before the court was “whether a winter storm…during that time period triggered the force majeure provisions in the hedge agreements, thereby excusing the Sellers’ non-performance.”

The Agreements

The Agreements defined “Force Majeure” as follows:

“an event or circumstance which prevents the Claiming Party from performing its obligations . . .  which event or circumstance was not anticipated as of the date the Power Transaction was agreed to, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided”.

Further, the Agreements explicitly excluded the following from the definition of “Force Majeure”:

“(i) the loss of Buyer’s markets; (ii) Buyer’s inability economically to use or resell the Product purchased hereunder; (iii) the loss or failure of Seller’s supply; or (iv) Seller’s ability to sell the Product at a price greater than the Contract Price”.

For purposes of force majeure clauses, the court agreed with the Buyer that the following are not sufficient to trigger the Agreements’ clause:

  • “Sellers’… inability to generate electricity at their respective windfarms during the storm” which is a term that was specifically excluded from the definition of the clause;
  • “An increase in the price of energy” which was not an unanticipated event because the parties anticipated price fluctuation as it is the underlying purpose of the contract. The court further reasoned that the financial considerations brought about by the storm were not bases for non-performance under a contract as financial hardships alone do not trigger force majeure clauses; and
  • “Impact of weather on the ability of a windfarm to produce electricity” which also was not considered as an unanticipated event because it was not specifically included within the definition of the clause.

While the court found that the windfarm’s ability to generate electricity during winter storm did not trigger the force majeure provisions in the Agreements, the court nonetheless denied Buyer’s motion for summary judgment. The court found that “as the Sellers point out in their opposition papers, “one potentially critical issue is whether the nonperforming party even could have delivered during the time period in which it was claiming force majeure”. The court further reasoned that the Buyer failed to submit evidence that it was, in fact, possible for the Seller to deliver the energy under the parties’ Agreements. As such, Buyer J.P. Morgan failed to satisfy its burden in demonstrating the absence of genuine issues of material fact.


Whether an event will excuse non-performance under a force majeure clause depends on how such events are defined in a contract. The cases cited by the court stand for the proposition that where the parties themselves have explicitly outlined the force majeure clause in their agreement, that outline dictates the scope of the clause. As such, parties should cautiously draft force majeure clauses and carefully consider the kind of breach that a force majeure event may trigger.

An increasingly commonplace procedural mechanism for narrowing evidentiary issues before a hearing begins is the motion in limine.  A new proposal proffered by the Commercial Division Advisory Council (“CDAC”), put out for public comment on October 27 by the Office of Court Administration, seeks to amend Commercial Division Rule 27 in order to provide much-needed guidance on such motions.

A motion “in limine” (“at the threshold” or “at the outset”) is a prophylactic request made to the court — and argued outside the presence of the jury — seeking to “permit a party to obtain a preliminary order before or during trial excluding the introduction of anticipated inadmissible, immaterial, or prejudicial evidence or limiting its use” (State of New York v Metz, 241 AD2d 192, 198 [1st Dept 1998]). While there is no express statutory basis for a motion in limine, a court’s inherent power to admit or exclude evidence provides the basis for the motion.

There are certain strategic advantages to making a motion in limine. Aside from its main function of preventing opposing counsel from providing inflammatory or prejudicial  evidence before the jury (including certain lines of questioning, arguments, and objections), it affords the court the opportunity to make a considered ruling, rather than being forced to hastily decide issues off-the-cuff under the time constraints and pressures of trial.  It can also be utilized as a delay tactic, undercutting well-prepared adversaries who have no doubt spent days and hours preparing for trial.

On the other hand, there are certain risks to a motion in limine to the extent that it potentially may draw the adversary’s attention to evidence, arguments, or theories that it may have not previously considered. It may also afford opposing counsel with ample opportunity to conduct thorough research on the evidentiary issues raised by the motion and oppose it.

And yet, the current Commercial Division Rule 27 provides no specific guidance about the subject matter included in motions in limine, or the timing of opposition papers, merely providing: “The parties shall make all motions in limine no later than ten days prior to the scheduled pre-trial conference date, and the motions shall be returnable on the date of the pre-trial conference, unless otherwise directed by the court.”

In its proposal, the CDAC seeks to amend Rule 27  to add a deadline for the service of opposition papers to motions in limine – no later than two days before the return date of the motion and to provide guidance on the types of broad issues that motions in limine should address   for example, (1) the receipt or exclusion of evidence, testimony, or arguments of a particular kind or concerning a particular subject matter, (2) challenges to the competence of a particular witness, or (3) challenges to the qualifications of experts or to the receipt of expert testimony on a particular subject matter.

Additionally, the proposal recommends that objections to the admissibility of specific exhibits or specific deposition testimony based on basic threshold issues such as lack of foundation or hearsay shall be made under Rule 28 (Pre-Marking of Exhibits) and Rule 29 (Identification of Deposition Testimony).

Lastly, the proposal admonishes that a motion in limine is an improper substitute for an untimely motion for summary judgment made at the eleventh-hour and designed as a guise to have the court decide dispositive legal issues. As the CDAC states in its Rationale for Revision, “the courts will not be receptive to such an initiative.”

For those interested, the public comment period is open until December 30, 2022, and comments are to either be: emailed to rulescomments@nycourts.gov; or sent to Anthony R. Perri, Esq., Acting Counsel, Office of Court Administration, 25 Beaver Street, 11th Fl., New York, New York 10004.

It is no secret by now that remote proceedings are here to stay. Driven at first by the safety protocols related to the COVID-19 pandemic, remote proceedings have outlived those protocols, and they remain the preferred forum for many parties and Justices.  The recent pages of this blog are filled with caselaw and proposed rule changes underscoring the reality that virtual proceedings will remain an integral part of the practice of law for the foreseeable future (see this post regarding Commercial Division Rule 1 and requests to appear remotely, or this post concerning remote depositions).

On September 23, 2022, the Office of Court Administration sought public comment on a proposal by the Commercial Division Advisory Council (“CADC”) to amend Commercial Division Rule 36 to expressly authorize courts to order virtual evidentiary hearings and bench trials without the consent of the parties, upon a finding of good cause.

Rule 36, titled: Virtual Evidentiary Hearing or Non-jury Trial, currently provides that, if there is appropriate videoconferencing technology, the court “may, with the consent of the parties, conduct an evidentiary hearing or a non-jury trial utilizing video technology.”  The proposed amendment would clarify that the court may “with the consent of the parties, or upon a motion showing good cause, or upon the court’s own motion, conduct an evidentiary hearing or non-jury trial utilizing video technology.” 

This proposed change follows a similar change to Commercial Division Rule 37.  As discussed in this post, new Commercial Division Rule 37 provides that the courts may “upon the consent of the parties or upon a motion showing good cause, order oral depositions by remote electronic means.”  If the court can order that depositions can be remote, why can’t it order the same for evidentiary hearings and bench trials? 

The CDAC notes that the proposed amendment simply clarifies the authority that the courts already have.  Relying mostly on Judiciary law § 2-b(3), which empowers courts with the authority to “devise and make new process and forms of proceedings, necessary to carry into effect the powers and jurisdiction possessed by it,” several courts have concluded that even without amendment to the Commercial Division Rules, courts have the authority to order remote proceedings over the objection of a party (see, e.g., Quattro Parent LLC v Rakib, 2022 N.Y. Slip Op. 30190[U], 3 [NY Sup Ct, NY Co 2022] [Masley, J.]; Wyona Apartments LLC v Ramirez, 70 Misc 3d 591 [Civ Ct, Kings Co 2020]).

The more interesting portion of the proposal lies in the CADC’s proposed addition of subsection (d), which provides:

In connection with any opposed motion [to proceed with a virtual hearing or non-jury trial], the Court shall determine the existence of “good cause” by considering at least the following factors:

(1) the overall efficiency of conducting a virtual proceeding, including but not limited to consideration of the convenience to all parties involved, the time and costs of travel by counsel, litigants, and witnesses to the location of the trial or hearing, and avoiding undue delay in case management and resolution;

(2) the safety of the parties, counsel, and the witnesses, including whether counsel, the litigants, and the witnesses may safely convene in one location for the trial or hearing; and

(3) Prejudice to the parties.

Enumerating these factors in Rule 36, the CADC reasons, “will allow the Commercial Division to increase efficiency and to reduce unnecessary litigation.” 

These factors seem to favor remote proceedings.  Courts have already held that virtual proceedings do not prejudice a party (see A.S. v N.S., 68 Misc 3d 767, 768 [Sup Ct, NY Co 2020]), so factor (3) is a non-factor in all but exceptional circumstances.  And it is difficult to imagine a circumstance where factor (1) or (2) would counsel in favor of an in-person hearing; remote proceedings will always entail less travel time and costs and greater “safety.”  If courts cabin their consideration to the factors proposed by the CDAC, we will see a lot more virtual proceedings.

The proposed rule also permits courts to consider other factors. Depending on the circumstances, the security of the proceedings and risk of unauthorized electronic access, the risk that a witness may get off-camera coaching during their testimony, and the effective presentation of evidence (particularly non-documentary evidence) might all weigh into the Court’s analysis. 

Comments to the proposal are due by November 23, 2022, by email to rulecomments@nycourts.gov.  In the meantime, counsel should keep their video-cameras and Zoom-suits handy.

For commercial practitioners who happen to be fans of the TV series “The Office,” Dwight Schrute’s “Learn Your Rules, You Better Learn Your Rules” jingle perfectly describes the constant theme of practicing before the New York Commercial Division. Since its inception in 1993, the Commercial Division has garnered the reputation of placing a heavy emphasis on rules for purposes of efficiency. As readers of this blog may know, those who fail to comply with the Commercial Division Rules, and/or the individual practice rules of a particular Commercial Division judge, will suffer the consequences. A recent decision issued by Justice Robert R. Reed illustrates this principle.

In Latin Mkts. Brazil, LLC v McArdle, a renowned conference promoter in the investment management industry (“Plaintiff”), commenced an action in 2020 against two former employees (“Defendants”), alleging that Defendants stole and used its trade secrets to form a competing entity in the same industry. The parties appeared before the Court for a Compliance Conference, and the Court issued a Compliance Conference Order that granted Plaintiff “leave to file a notice of motion to compel forensic inspection of the computers involved in the subject litigation.”

Plaintiff filed a motion to compel Defendants to respond to its discovery demands and produce, among other things, (i) certain computers belonging to Plaintiff, which the parties agreed to by stipulation, (ii) electronic discovery from local hard drives of computers used by Defendants in their business operations, and (iii) responses to Plaintiff’s Second Notice for Discovery and Inspection, and First Set of Interrogatories. Plaintiff argued that it obtained permission to make this discovery motion at the prior Compliance Conference.

In opposition, Defendants argued that Plaintiff’s motion to compel should be denied based on Plaintiff’s noncompliance with Manhattan Commercial Division Justice Robert Reed’s Part 43 Rule 6(h), which states that “discovery motions are discouraged,” and Commercial Division Rule 14, which requires that “discovery disputes are preferred to be resolved through court conference as opposed to motion practice.” In fact, prior to filing their opposition papers, Defendants’ counsel emailed Plaintiff’s counsel, requesting that Plaintiff withdraw its motion on the basis that it was only authorized to file a motion to compel for the “forensic inspection of the computers” at issue. Plaintiff’s counsel refused to withdraw its motion, and argued on reply that it properly included discovery issues that were raised in previous correspondence with the Court, but not addressed in the Compliance Conference Order.

Justice Reed denied Plaintiff’s motion in its entirety on the basis that “the filing of the instant motion was done without leave of court and in direct contravention of Commercial Division Rules 14 and 24, and Part Rule 43 6(h).” Justice Reed cited to a recent decision, Maple Drake Austell Owner, LLC v D.F. Pray, Inc., in which he denied a motion to strike on the basis that defendant “failed to comply with this court’s explicit rules … [by] never submitt[ing] a letter to the court outlining any of the discovery disputes.”


In light of the famous idiom – “penny wise and pound foolish” – practitioners who fail to adhere to the Commercial Division Rules and/or the individual rules of a particular Commercial Division judge are not only wasting their time, but also the court’s time, and their client’s money. In the words of my colleague Matt Donovan,“[c]heck the rules, folks. Always check the rules.”

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.  

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

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

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

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

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

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

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

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

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

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

Rule 6. Form of Papers.

* * *

(d)          Interlineation of Responsive Pleadings

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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