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It’s been a minute since our last installment of our “Check the Rules” series here on New York Commercial Division Practice, in which we occasionally highlight decisions from Commercial Division judges holding litigants and practitioners to account for noncompliance with either the Rules of the Commercial Division or the individual practice rules of the judges themselves. 

Way back in 2017, for example, we highlighted a decision from former Manhattan ComDiv Justice Eileen Bransten (may she rest in peace), striking an expert’s reply report under ComDiv Rule 13(c) because it included new data and opinions that were available to the expert when his initial report was submitted.  ComDiv Rule 13(c), noted Justice Bransten, was “promulgated so no party will be ‘sandbagged’ or surprised by another expert’s opinion,” not for an expert to “correct the deficiencies and omissions made in an initial expert report,” or for an expert to “say what he neglected to say in his opening report.”

Several years ago, we highlighted a decision from Manhattan ComDiv Justice Joel M. Cohen striking an expert rebuttal report under ComDiv Rule 13(c) because of its self-described “preliminary” conclusions and vague references to “disputed factual assertions” and “significant intercompany transactions,” which, according to Justice Cohen, constituted “insufficient notice of any opinions [he] propose[d] to offer or the bases for those opinions.”    

It turns out that ComDiv Rule 13(c) has played a prominent role in a few Manhattan court decisions this year as well.  But before we dive in those decisions, let’s remind ourselves of what Rule 13(c) actually says:

Unless otherwise stipulated or ordered by the court, expert disclosure must be accompanied by a written report ….  The report must contain:

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

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

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

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

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

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

In January of this year, Manhattan ComDiv Justice Melissa A. Crane in Moghtaderi v Apis Capital Advisors, LLC granted the defendants’ motion in limine, precluding the plaintiff’s expert under ComDiv Rule 13(c) in a case involving a dispute over the amounts paid to the plaintiff under the parties’ operating agreement after he voluntarily withdrew from their investment-advisory firm. 

According to the decision, the plaintiff was particularly aggressive throughout the course of discovery, having “no trouble asking the court to award discovery throughout the course of this acrimonious litigation” and “no problem reaching out to the court for every trivial discovery dispute.”  Yet eight months after filing his Note of Issue and filing two post-NOI motions to compel, the plaintiff for the first time disclosed in his list of trial witnesses that he intended to call an expert. 

The defendants moved to preclude the plaintiff’s expert from testifying.  Citing the language in ComDiv Rule 13(c) that provides that “the note of issue and certificate of readiness may not be filed until the completion of expert disclosure,” and that “[e]xpert disclosure provided after these dates without good cause will be precluded,” the court had little problem granting the motion:

Never, during the midst of all this motion practice (or at any other point) did plaintiff reveal they intended to call an expert at trial,” the court stated.  Instead, plaintiff waited until the eve of trial.  This is prejudicial to defendants who have been diligently preparing for a trial without an expert for months.   

In May of this year, the First Department in Taxi Tours Inc. v Go N.Y. Tours Inc. unanimously affirmed a trial-court decision handed down by Manhattan ComDiv Justice Jennifer G. Schecter a year ago, which precluded under ComDiv Rule 3(c) the defendant’s expert report and testimony in a case involving allegations of deceptive trade practices and unfair competition between competing New York City tour-bus operators. 

In Taxi Tours, the defendant alleged that the plaintiff fabricated thousands of online customer posts positively reviewing its own services and negatively reviewing the plaintiff’s services.  The reviews themselves – which by the time the parties were engaged in expert disclosure were no longer available on the internet – were not produced in the course of discovery.  Instead, the defendant and its proffered expert relied on an internet consultant’s summary of the reviews. 

The plaintiff moved to preclude the expert’s report.  Citing ComDiv Rule 13(c), the court similarly had no difficulty in granting the relief requested:

[T]he court does not understand how [the defendant] intends to prove that [the plaintiff] posted the allegedly fake reviews and that they are deceptive … without actually introducing them into evidence.  [The defendant] did not disclose those reviews during discovery and now there is no way they will be able to introduce them at trial.  It cannot seek to avoid this evidentiary problem by effectively seeking to admit the reviews through testimony.  Nothing could possibly be more prejudicial than admitting core evidence that a [party] has not seen based only on testimony from an expert that did not even personally review it.

On appeal, the First Department agreed, holding that “[t]he review data had been gathered years earlier by a nonparty entity and [the defendant] should have known about its rule 13(c) obligation to supply that data while submitting the expert disclosure.”

Finally, just last month, Manhattan Supreme Court Justice David B. Cohen in Smartmatic USA Corp. v Fox Corp. vacated a decision rendered by a Judicial Hearing Officer who had been appointed to adjudicate on consent the parties’ discovery disputes under the ComDiv Rules (including ComDiv Rule 13[c]) in a case involving allegations by the plaintiff, an election-technology and software company, that defendant Fox News defamed and disparaged it by publicly stating or implying on broadcasts that its election technology was “rigged” to “steal” the 2020 Presidential election. 

After receiving a lengthy rebuttal report from Fox’s “journalism” expert, which referenced several deposition transcripts from a similar but separate defamation action against Fox venued in Delaware (for which the same expert also had submitted a report), the plaintiff demanded production of the transcripts and related exhibits.  Fox responded by amending the report to eliminate the references to the transcripts and submitting an affirmation from the expert stating that she “inadvertently” referenced the transcripts, which she had not considered in the preparation of her report. 

The plaintiff made a motion to compel before the JHO, who ultimately ruled in favor of Fox, finding that “it did not appear that [the expert] has read or reviewed the documents at issue here as they were not specifically mentioned in [the] report.” 

The plaintiff then made a motion to vacate before the court, which found for the plaintiff and effectively reversed the JHO for his failure to consider the issue under ComDiv Rule 13(c):

[The] JHO … erred by failing to discuss Commercial Division Rule 13, which governs the production of the documents here, and his focus on whether [the expert] explicitly mentioned the deponents’ names in her report was also erroneous as the Rule requires disclosure of anything provided to and reviewed by an expert, whether or not it is thereafter mentioned in an expert report. 

Citing relevant precedent, the court specifically noted that, in the context of expert disclosure, “[t]he term ‘considered’ has been interpreted to mean documents ‘provided to and reviewed by the expert.’”  And because it was undisputed that the expert had read, reviewed, and considered the transcripts in connection with her report in the Delaware action, reasoned the court, “there [w]as no basis for defendants to argue that she never read or reviewed the documents.”

Did you know that the New York State United Court System publishes an annual report covering the advances, challenges, and achievements in and by our New York State courts over the past year? If you did not, now is the time to head over to the NYCourts website and browse the recently released 45th Annual Report covering the 2022 calendar year.

The Annual Report is a visual reminder that we practice in “one of the largest, busiest, most complex court systems in the world,” as Acting Chief Administrative Judge Tamiko Amaker describes. Accompanied by vivid photos of some of the people and places involved with our courts, the 2022 Annual Report highlights the UCS’s initiatives toward equal justice within the courts (pgs. 15-23) and public access to justice (pgs. 25-39), as well as a fiscal overview of the UCS (pg. 55), and caseload statistics (pgs. 59-69).

Of particular interest to readers of this blog is the feature on the Commercial Division.

Since its creation in 1995, the Commercial Division of the New York State Supreme Court has transformed business litigation and made the State a preferred forum for complex business disputes. Renowned as one of the world’s most efficient venues for the resolution of commercial disputes and located in the world’s leading financial center, the Commercial Division is available to businesses of all sizes, both inside and outside the State of New York

Ever advancing the ball in substantive areas of the law and procedural rules and practices, the Commercial Division adopted and enacted 11 of the new procedural rules and amendments proposed by the Commercial Division Advisory Council in 2022 (which this blog has spotlighted), to wit:

As we move further into 2023, keep an eye on this blog for updates on developments in the Commercial Division’s rules and practices. As we’ve said before, always check the rules!

Hat tip to Chair of the Advisory Council and friend-of-the-blog, Robert L. Haig, for continuing to share with us the good work being done by the Advisory Council throughout the year.

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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.”

Upshot:

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.”

Litigation in the Commercial Division is efficient and effective in part because its judges strictly enforce the Commercial Division Rules.  Those unsure can peruse Matt Donovan’s “Check the Rules” series on this blog, including (apropos the subject of this post) his post concerning the amendments to Commercial Division Rule 17.

One of the most significant rules of the Commercial Division is the limitation on the size of submissions.  In 2018, the Commercial Division Rules were amended to implement a word limit rather than a page limit.  According to a Memorandum by the Commercial Division Advisory Council, that rule change was designed to reduce incentives for attorneys to fit more text into the page limit. Commercial Division Rule 17 now provides:

Unless otherwise permitted by the court: (i) briefs or memoranda of law shall be limited to 7,000 words each; (ii) reply memoranda shall be no more than 4,200 words and shall not contain any arguments that do not respond or relate to those made in the memoranda in chief; (iii) affidavits and affirmations shall be limited to 7,000 words each. The word count shall exclude the caption, table of contents, table of authorities, and signature block.”

One need not look far to determine how seriously the Commercial Division Justices take the word count limitations.  Justice Borrok’s Part Rules provide that “Word limits specified in Commercial Division Rule 17 will be strictly enforced, unless permission to expand the word limits is granted in advance of the filing of the papers.”  Justices Grays (Queens County), Chimes (Erie County), Gomez (Bronx County), Reed (New York County), and Masely (New York County) all have similar rules.  Justice Jamieson of the Westchester County Commercial Division reminds counsel, “All papers must comply with the applicable provisions of the CPLR and with Rules 16, 17 and 18 of the Commercial Division Rules. In addition, the font size of text and footnotes must be no smaller than 11 point. Papers which do not comply may be rejected.”

Penalties for non-compliance with the word limits can be severe.  In Levine v Cohen, 2019 N.Y. Slip Op. 34059[U], 22 [N.Y. Sup Ct, Nassau County 2019], Nassau County Commercial Division Justice Timothy Driscoll struck an attorney’s affirmation that (among other defects) violated the commercial division word limits.

Last month, New York County Commercial Division Justice Joel M. Cohen issued another warning to the Commercial Division bar about improper attempts to circumvent the word limits of Commercial Division Rule 17 by filing multiple documents in the place of one.  In Durst Pyramid LLC v. Silver Cinemas Acquisition Co., 2022 NY Slip Op 31958(U), the Plaintiff filed a motion for summary judgment that included a nearly 7,000 word memorandum of law, but that memorandum of law did not include a statement of facts.  Rather, the memorandum simply referred the Court to four additional affidavits.  In his ruling on Plaintiff’s motion for summary judgment, Justice Cohen observed:

A brief note on process: Motions for summary judgment require Rule 19-a statements, but such a statement is not a substitute for including a Statement of Facts (with citations to the record) in the Memorandum of Law.  A statement of facts is an integral part of a summary judgment brief, not merely an appendix. And counsel may not evade the applicable word-count limits by omitting facts sections from their briefs. Here, Landlord’s opening submission went on for 414 pages, including a nearly 7,000-word memorandum of law and numerous exhibits, yet did not include a facts section. Instead, counsel referred the Court to four separate affidavits, totaling an additional 11,816 words. Doing so, in the Court’s view, circumvented the wordcount limit set forth in the Commercial Division Rules. While the Court will not strike the opening brief in this instance, counsel are advised that such submissions will not be considered in the future.”

(emphases added, citations omitted)

Counsel have been warned.  The Commercial Division word limitations exist to keep arguments concise, not test whether lawyers can “respectfully refer the Court to” or “incorporate herein” other filings into their memoranda.

 

The New York Commercial Division was created in 1993 “to test whether it would be possible, by concentrating on commercial litigation, to improve the efficiency with which such matters were addressed by the court and, at the same time, to enhance the quality of judicial treatment of those cases.”  By implementing rules and procedures developed with efficiency in mind and after careful consultation with Judges and practitioners alike, the Commercial Division has become a resounding success; it is one of the most efficient and effective forums in the world for the litigation of complex civil disputes.

It should therefore come as no surprise that other New York courts have taken notice of the innovative rule changes contributing to the success of the Commercial Division.  As Chief Administrative Judge Marks observes: “through the work of the Commercial Division Advisory Council – a committee of commercial practitioners, corporate in-house counsel and jurists devoted to the Division’ s excellence – the Commercial Division has functioned as an incubator, becoming a recognized leader in court system innovation, and demonstrating an unparalleled creativity and flexibility in development of rules and practices.”

Now, by Administrative Order effective February 1, 2021, the Uniform Civil Rules for the Supreme Court (the “Uniform Rules”) will incorporate, in whole or in part, nearly 30 Commercial Division Rules.  Some of these changes were foreshadowed by my colleague Paige Bartholomew in 2018 when the Unified Court System’s Advisory Committee on Civil Practice requested public comment on whether to adopt nine of the Commercial Division’s Rules.   Continue Reading Innovation Becomes the Norm: Commercial Division Rules Shape Revised Uniform Rules for the Supreme Court and County Court

Know the Rules

As readers of this blog know by now, we here at New York Commercial Division Practice frequently post on new, proposed, and/or amended rules of practice in the Commercial Division.  Just last month, for example, my colleague Viktoriya Liberchuk posted on the Advisory Council’s recent proposal to amend ComDiv Rule 6 (“Form of Papers”) to mandate hyperlinks in legal briefs, allowing adversaries, judges, and other court personnel immediate electronic access to cited cases, statutes, and other supporting documentary evidence.

We’ve also reported on ComDiv decisions taking lawyers to task for failing to comply with the particularities of practicing in the Commercial Division — both with respect to noncompliance with the Rules themselves, as well as noncompliance with the individual practice rules of this or that ComDiv judge.

In one of the first ComDiv decisions of 2020, Manhattan Commercial Division Justice Andrea Masley addressed the propriety of a post-argument submission by a defendant under ComDiv Rule 18 on a motion to dismiss.

Hawk Mtn. LLC v Ram Capital Group LLC involved statute-of-limitations issues vis-à-vis a promissory note and the validity of a related release.  Following oral argument on its dismissal motion, the defendant submitted a recent federal-court decision out of the Eastern District of Pennsylvania, apparently in an effort to resolve a dispute over whether the parties in the Hawk Mtn. case qualified as “affiliates” under, and therefore were covered by, the release in question.  Citing the exception to ComDiv Rule 18’s general prohibition against “sur-reply and post-submission papers” — namely, that “counsel may inform the court by letter of the citation of any post-submission court decision that is relevant to the pending issues, but there shall be no additional argument” — Judge Masley allowed the defendant to supplement the record on its dismissal motion but made perfectly clear that she would “disregard any arguments made in [the defendant’s] accompanying letter.”

Having seen the Hawk Mtn. decision, and given the recent turn of year, we thought it a worthwhile exercise to take a quick look back at 2019 for other decisions addressing issues of (non)compliance with the ComDiv Rules.  What follows are a couple of notable examples from the Manhattan Commercial Division last year — both from Justice Joel M. Cohen as it just so happens — addressing ComDiv Rules 13 and 14 concerning expert disclosure and pre-motion conferences respectively.

In 30-32 W. 31st LLC v Heena Hotel LLC, Judge Cohen granted the defendants’ motion to strike an expert rebuttal report submitted by the plaintiffs in a dispute over the development and sale of a hotel.  Judge Cohen found that the report did not comply with ComDiv Rule 13 in a number of important respects, including primarily the expert’s failure to provide a “complete” statement of his opinions and to identify any documentation he relied upon to support his opinions.  The incompleteness of the expert’s report was perhaps captured best in his own words — to wit:

At this time and on a preliminary basis I find that I do not concur with the conclusion reached by [the defendants’ expert].  Additional forensic accounting work is required, and I reserve the right to amend and supplement this draft.

The draft report also made repeated references to “disputed factual assertions” and “significant intercompany transactions” but altogether failed to specify the facts in dispute or the transactions at issue.  Such a report, according to Judge Cohen, “provides insufficient notice of any opinions [the expert] proposes to offer or the bases for those opinions” and thus offends the fundamental purpose behind expert disclosure — namely, “No Sandbaggers Allowed!”

In Village Green Mishawaka Holdings, LLC v Romanoff, Judge Cohen shot down a red-herring argument and related “barbed references” in an attorney affirmation when denying a non-party’s motion to quash a subpoena.  Judge Cohen attacked the motion as “procedurally improper” as well, citing ComDiv Rule 14’s prohibition on filing motions without first requesting a pre-motion conference and finding that “there [wa]s no indication that [the non-party] ever requested such a conference prior to filing this motion.”  Judge Cohen also took issue with the form of the attorney affirmation, citing his own practice rules prohibiting so-called “brief-irmations” and “brief-adavits” submitted in lieu of a proper memo of law:  “All motion papers … must include a Memorandum of Law,” and “Affidavits or Affirmations of counsel containing legal argument should not be submitted.”

Check the rules, folks.  Always check the rules.