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

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

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

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

Continue Reading When the Clocks Are Turned Back, Women Litigators Step Forward: NYSBA ComFed Fall Event, “Taking the Lead 2024”
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Under CPLR §§ 3111 and 3122(d), “[t]he reasonable production expenses of a non-party witness shall be defrayed by the party seeking discovery.” The Commercial Division Rules at Appendix A (“Guidelines for the Discovery of ESI”) define “reasonable production expenses” to include:

  1. Reasonable fees charged by outside counsel and e-discovery consultants;
  2. Reasonable costs incurred in connection with the identification, preservation, collection, processing, hosting, use of advanced analytical software applications and other technologies, review for relevance and privilege, preparation of a privilege log (to the extent one is requested), and production;
  3. Reasonable costs associated with disruption to the non-party’s normal business operations, provided such costs are quantifiable and warranted by the facts and circumstances; and
  4. Other costs reasonably identified by the non-party.
Continue Reading The Cost of Withholding ESI: First Department Sets Limits on Non-Party Recovery of ESI Production Costs
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Tom Strecker, Unsplash

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

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

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

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

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

Continue Reading Playing Nice in the Litigation Sandbox

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

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

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

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

Change in the ComDiv Monetary Threshold?

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

Trials and ComDiv Rule 9(b)

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

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

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

Courtroom of the Future / AI Issues

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

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

ComDiv Justices’ Pet Peeves

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

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

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

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Giorgio Trovato, Unsplash

Under CPLR 7502(c), a court in “the county in which an arbitration is pending…[is permitted to] entertain an application…for a preliminary injunction in connection with an arbitration that is pending or that is to be commenced inside or outside this state.”

A recent decision from Justice Anar R. Patel of the Manhattan Commercial Division in Conlon Holdings LLC v Chanos & Company demonstrates that mere threats of imminent dissipation of funds are insufficient grounds for the issuance of a preliminary injunction under CPLR 7502(c).

Background

Petitioners Conlon Holdings LLC and ConlonBeithir LLC (“Petitioners”) moved by Order to Show Cause seeking injunctive relief in aid of arbitration under CPLR 7502(c). Petitioners sought recovery for breach of contract and promissory estoppel, among other claims, in connection with a loan agreement (“Loan Agreement”) executed by James S. Chanos and Chanos & Company LP (the “Company”) (together, the “Respondents”).

This arbitration was precipitated by Mr. Chanos’s sale of a residential property located in Miami Beach, Florida (“Miami Residence”). Petitioners, who were investors in the Company, claimed that Mr. Chanos failed to disclose the sale of the Miami Residence to them notwithstanding the terms of the Loan Agreement requiring Mr. Chanos to identify the Miami Residence as security for the loan. Petitioners sought to enjoin Respondents from “transferring the proceeds of the sale of the [Miami Residence]”; to remove Kynikos Associates Ltd as a General Partner of the Company; and to appoint a temporary receiver until a new general partner was selected. Ultimately, the court denied Petitioners’ application.

Analysis

“[T]he party who seeks a preliminary injunction in aid of arbitration must show, in addition to the potential ineffectiveness of the award, the usual three requirements for equitable relief: (1) likelihood of success on the merits of the claim; (2) irreparable injury in the absence of the injunction, and (3) a balance of equities in favor of the moving party” (emphasis added).

First, the court denied Petitioners’ request to freeze all proceeds from the sale of the Miami Residence while the parties engaged in arbitration. The court found that that Petitioners were misguided in arguing that, in order to establish that the potential arbitration award would be ineffective, “they must only show…the purported violation of their rights [under the Loan Agreement].”  Justice Patel noted that Petitioners cited no authority for that proposition. Further, the court noted that, in making their argument, Petitioners “have misapprehended and/or conflated the appropriate standard of review” because it was for the arbitration panel to decide whether there was purported breach. The court declined to rely on Petitioners allegations alone, absent any evidence, that Respondents intended to “transfer the funds outside of the jurisdiction or make poor investment decisions to yield substantial losses, which would adversely impact Respondents themselves” and render the potential arbitration award ineffective.

Second, the court found that Petitioners did not demonstrate a sufficient likelihood of success in arbitration because they did not have standing to enforce the Loan Agreement. The court found that Petitioners failed to (1) demonstrate that their “status as aggrieved parties as investors in the Company affords them standing to enforce the Loan Agreement”; (2) allege the necessary elements of a promissory estoppel claim because there were no allegations that “they reasonably relied upon Mr. Chanos’s…promise to repay the loan in deciding to invest in the Company, and sustained a resulting injury”; and (3) demonstrate that they were parties to the Loan Agreement because “Petitioners were not limited partners [of the Company at the execution of the] Loan Agreement on December 31, 2018.”

Third, the court held that Petitioners would not be irreparably injured absent the grant of injunctive relief, reasoning that monetary damages were otherwise available to Petitioners. The court also noted that Petitioners did not argue that they would suffer irreparable harm, but instead adopted a “standard of urgency,” claiming that Mr. Chanos would likely dissipate the funds. The court, however, highlighted the fact that the alleged “urgency” – i.e. breach of the Loan Agreement –occurred way back in June 2023, thereby undermining “the sense of urgency that ordinarily accompanies a motion for injunctive relief.”

Finally, the court found that given “the Petitioners’ failure to establish a likelihood of success on the merits and the availability of money damages, the balance of equities is in Respondents’ favor.”

The court also found that the Petitioners’ request for the removal of the general partner of the Company and the appointment of a receiver were premature as the relief hinged on the ultimate findings in the pending arbitration proceeding.

Takeaway

Demonstrating the “potential ineffectiveness of the award” within the meaning of CPLR 7502(c), requires substantial evidence. Courts are hesitant to grant preliminary injunctions in aid of arbitration seeking to freeze assets based solely on vague allegations of threats of imminent dissipation of funds.

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Lawyers practicing in the Commercial Division are keenly aware of issues related to attorneys’ fee awards in commercial cases.  Commercial agreements commonly contain a provision awarding attorneys’ fees to a prevailing party in a manner sufficient to satisfy entitlement to an award under the contractual exception to “American Rule.”  However, entitlement to a fee award is only the beginning of the battle.  Fee applications are oftentimes met with ardent objection, attacking both the reasonableness of services and the reasonable value of those services in various ways. 

One such application was recently decided by the Commercial Division in Core Group Marketing LLC v. MIP One Wall Street Acquisition LLC, where Manhattan Commercial Division Justice Reed granted both motions for an award of attorneys’ fees.

The Dispute and Litigation

The genesis of the dispute in Core Group concerns the termination by MIP One Wall Street Acquisition LLC (“MIP”) of Core Group Marketing LLC (“CGM”) as its broker in selling units of MIP’s Wall Street property.  CGM initiated the suit seeking a $750,000 “Termination Fee” it alleges was owed under the Co-Exclusive Sales and Marketing Agreement (the “Agreement”) between the parties.  Included in the Agreement was an attorneys’ fee provision that permitted the prevailing party in enforcement litigation to be awarded “reasonable attorneys’ fees and costs, including any fees and costs incurred in enforcing any judgment.”   

On July 25, 2022, MIP was granted summary judgment dismissing CGM’s complaint in its entirety.  MIP was also granted summary judgment on its attorneys’ fees counterclaim.  MIP thereafter filed two motions seeking a total award of attorneys’ fees and costs in the sum of $268,569.62. 

The Parties Positions

In support of the fee application, MIP submitted an affirmation from its attorney that affirmed that the fees were (1) reasonable; (2) in line with rates commonly charged; and that (3) the time spent was reasonable given CGM’s insistence on proceeding with discovery.  MIP included detailed invoices issued by its counsel in further support of the application. 

CGM opposed the application.  CGM argued that the amount sought was unreasonable on its face, ­­­­­­­­­­­contending in sum that a substantial amount of the fees sought for the first motion included time for unnecessary discovery ($36,000), including the retention of an ESI vendor ($30,000).  Specifically, CGM argued that it was MIP’s delay in bringing its summary judgment motion that caused the referenced discovery costs, and that those costs therefore were not reasonable.  As to the second motion, CGM argued that MIP’s fees incurred on appeal ($80,000) in successfully defending its grant of summary judgment were excessive because the issue involved was not novel, and that additional appellate staff therefore was not required.     

The Court Holds that the Fees Are Reasonable in Their Entirety

Over CGM’s objections, the Court determined that given “‘(1) the time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; (2) the lawyer’s experience, ability, and reputation; (3) the amount involved and benefit resulting to the client from the services; (4) the customary fee charged for similar services; (5) the contingency or certainty of compensation; (6) the results obtained; and (7) the responsibility involved’” that all of MIP’s fees for litigation expenses ($157,026.51) were reasonable.  In doing so, the Court made a couple of observations that are noteworthy for Commercial Division litigators. 

First, the Court upheld the fees sought for discovery-related services and costs incurred for retaining an ESI vendor, even though the ESI results were never sent to CGM.  MIP’s affirmation set forth with some specificity the various discovery-related services provided, and the Court was not persuaded that those services were unnecessary or unreasonable.  In fact, the Court held that the fact that CGM was not provided the ESI documents was immaterial, as CGM did not dispute that the costs were incurred in gathering the documents.

Second, the Court did not adopt CGM’s reasoning that MIP should not be awarded the fees incurred for discovery because it delayed in brining a motion for summary judgment insofar as CGM failed to show how the costs were caused by any delay.  Notably, the Court did not take CGM up on its attempt to shift the cost for routine discovery-related services on its opponent. 

Lastly, the Court noted that the fees incurred in bringing a fee application are properly recoverable if encompassed by the applicable attorney-fee provision or statute.   The Court also granted MIP’s second motion for fees incurred post-summary judgment, including the fees incurred in successfully defending its award of summary judgment on appeal.  While CGM contended that the fees incurred ($80,000) were unreasonable because the issues involved were not novel, the Court held that CGM provided “no authority for arguing that, depending on the types of issues involved, the involvement of certain attorneys in the appellate process is inherently unreasonable.”  The Court therefore found $80,000 to be a reasonable amount of fees for litigating an appeal. 

The Takeaway

While entitlement to attorneys’ fees under agreement or statute is usually straightforward, a party seeking an award of fees would do well to provide the detail MIP provided in Core Group to assist the Court in determining that the fees sought are reasonable.  Parties opposing such an award should be similarly on notice, as the Commercial Division will require specificity and authority to uphold any objection.