commercial division rules

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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For those civil practitioners who don’t regularly practice in the Commercial Division – beware.  The Unified Court System’s Advisory Committee on Civil Practice (the “Committee”) has proposed that nine (9) Commercial Division Rules be broadly adopted by other, non-commercial civil courts.  These nine rules all have one common goal: to promote efficiency in New York courts.

Earlier this year, the Committee conducted a detailed evaluation of the Commercial Division Rules (22 NYCRR 202.70[g]) to determine which of those rules, if any, should be broadly adopted by non-commercial courts.  In a July 2018 report (the “Report”), the Committee recommended broader application of the following Commercial Division Rules:

Rule 3(a) – Appointment of a court-annexed mediator (as amended)

  • Rule 3(a) provides that a judge may direct, or counsel may seek, the appointment of an uncompensated mediator. This rule also allows counsel for all parties to stipulate having the case determined by a summary jury trial.  The Committee recommended statewide adoption of this rule, with a minor amendment stating that the court may advise (rather than direct) the appointment of a court-annexed mediator.  This rule will promote judicial efficiency and potentially result in the earlier resolution of cases through ADR.

Rule 3(b) – Settlement conference before a judge not assigned to the case

  • In addition to Rule 3(a), the Committee recommended adoption of paragraph (b), which provides that counsel can request a settlement conference before another judge who is not the judge assigned to the case.  The Committee noted, however, that it may be difficult to implement Rule 3(b) in some downstate counties where judicial resources may not be as readily available.

Rule 11-a – Limitations on interrogatories

  • The Committee also recommended statewide adoption of Rule 11-a, which, among other things, sets certain limitations on the use of interrogatories (i.e., interrogatories cannot exceed more than 25 in number, including subparts, and are limited to succinct categories). In the Committee’s view, this proposed amendment “would result in increased efficiency and streamlined litigation” and “serve as a useful guideline for limiting unnecessary, burdensome or abusive discovery practices.”

Rule 11-b – Privilege Logs (in part)

  • To reduce the time and costs associated with preparing document-by-document privilege logs, the Committee recommended the partial adoption of Rule 11-b, which permits the use of categorical privilege logs.  According to the Committee, the categorical approach “is more efficient and cost-effective for the parties, helps streamline litigation and facilitates expeditious court review.”  However, the Committee is not in favor of Rule 11-b’s provision regarding cost allocation, which permits a party required to produce a document-by-document privilege log to apply to the court for costs associated with that log.  Rather, the Committee recommends that, in cases where the parties disagree about which approach to follow, the court should determine whether the categorical approach or the document-by-document approach will be used.

Rule 11-d – Limitations on depositions

  • Similar to the statewide adoption of Rule 11-a (limitations on interrogatories), the Committee recommends that Rule 11-d’s limitations on depositions be broadly adopted. Under this rule, the number of depositions is presumptively limited to ten (10) per party, and each deposition will be limited to seven (7) hours per deponent.  These limits can be changed by stipulation or by court order upon a showing of good cause.

Rule 11-e – Responses and objections to document requests (as amended)

  • It is no mystery that boilerplate objections have become widely disfavored among judges, and are even sanctionable in some courts. Thus, the Committee proposed the broad adoption of Rule 11-e, which requires parties responding to discovery requests to either state that the production will be made as requested, or state with reasonable particularity the grounds for any objection.  The proposed rule will also require a responding party to state, at the time if disclosure, whether the production of documents is complete, that there are no responsive, non-privileged documents in its possession, or explain why the production is not complete.

Rule 19-a – Statement of material facts for summary judgment motions

  • The Committee recommended statewide adoption of Rule 19-a, “as it is likely to greatly assist in narrowing and clearly setting forth the material issues.” The Committee further recommended that a statement of material facts be required in all cases involving summary judgment, and not just in cases “where the court directs.”

Rule 20 – Temporary restraining orders

  • This Commercial Division Rule requires notice to an adverse party of any application for a temporary restraining order, unless the moving party can demonstrate that “significant prejudice” would result from such notice. The Committee recommended statewide adoption of this rule because it “advances a just result by giving all parties notice of the issues and an opportunity to comment.”

Rule 34 – Staggered court appearances

  • Most judges generally have specific motion and conference days and, most parties are directed to appear at a specific time on such day (for example, Tuesdays at 9:30 a.m.). The result is often a courtroom packed with attorneys waiting to be heard, sometimes for hours. Rule 34, however, is intended to encourage “court staggered appearances” by providing litigants specific time slots to appear, depending on the nature of the appearance.  The goal of this proposed rule is obvious: to reduce congestion in the courtrooms and eliminate the inordinate amount of time attorneys spend waiting to be heard, thus reducing client costs and increasing courtroom efficiency.

The Committee is now seeking public comment on the recommendations set forth above.  However, the Committee determined that wholesale adoption of the Commercial Division Rules statewide is not warranted.  Indeed, many of the commercial division rules already exist in one form or another (i.e., Rule 1 [appearance by counsel with knowledge and authority, which is already incorporated into most conference orders; Rule 11-f [deposition of entities, which is already adequately addressed in CPLR Articles 23 and 31, respectively]) and, some of the specific rules may actually add to the costs of litigation or place additional burdens on litigants (i.e., Rule 21 [providing courtesy copies in e-filed cases, which, according to the Committee, is “contrary to the goals of paperless electronic litigation”]).

So what does this mean for civil practitioners?  Whether you practice mainly in the Commercial Division or in other civil courts, the Office of Court Administration is seeking to streamline litigation in non-commercial cases and make civil practice in all courts more efficient and practical.  If these rules are ultimately adopted statewide, ADR will become more commonplace, abusive discovery practices, such as boilerplate objections and excessive interrogatories, will not be tolerated, discovery will become more streamlined and efficient, and hopefully, litigants won’t be waiting in court for hours until their case is finally called.

The Administrative Board is now seeking public comment on the recommendations set forth in the Advisory Committee’s Report.  Those wishing to comment on the Report should e-mail their submissions to rulecomments@nycourts.gov or write to: John W. McConnell, Esq., Counsel, Office of Court Administration, 25 Beaver Street, 11th Floor, New York, New York 10004.  Comments must be received no later than January 15, 2019.

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

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

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

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

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

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

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

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

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

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

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

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

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 Commercial Division litigators often hope that mediation will lead to a negotiated settlement, but their expectation – based on their prior experience –  is that it will not.  In this sense, mediation seems to have significant unrealized potential as a settlement tool in the Commercial Division.

 

A new proposal of the ADR Committee of the Commercial Division Advisory Council, put out for public comment on June 22nd by OCA, seeks to tap into some of that unrealized potential in a relatively simple way: by encouraging parties to Commercial Division litigation who are going to mediation to select jointly their preferred mediator.  Could this simple idea make a difference?  Evidence cited by the ADR Committee- both anecdotal and statistical – suggests that mediation is much more likely to be successful when the parties agree on their mediator.

 

In its proposal, the ADR Committee noted that joint selection of a mediator is a factor consistently cited by Bar Associations for enhancing the effectiveness of mediation in Commercial Division cases but noted that because of the current language of Commercial Division Rule 3(a) – that “[a]t any stage of the matter, the court may direct or counsel may seek the appointment of an uncompensated mediator” (emphasis added) – the process of some court annexed mediation programs is for a mediator to be appointed from a roster instead of first giving the parties the opportunity to agree upon their neutral.  The proposal quoted the analysis by the former Co-Chairs of the New York State Bar Association’s Dispute Resolution Section’s Committee on ADR in the Court on the benefit of party-appointed mediators, which explained that historically, settlement rates from the EDNY (67%) and WDNY (72%) mediation programs, which afford the parties the initial opportunity to jointly choose their mediator, are significantly higher than in the New York County Commercial Division (34%) where mediators are selected for the parties by the ADR Coordinator.

 

The ADR Committee proposal would modify Rule 3(a) to include the following sentence: “Counsel are encouraged to work together to select a mediator that is mutually acceptable, and may wish to consult any list of approved neutrals in the county where the case is pending.”  The ADR Committee also pointed out that Nassau and Westchester County Commercial Divisions currently give parties five business days to attempt to agree on a mediator before the process of appointment reverts to the court and suggested that including such a time period in Rule 3(a) “would be optimal.”  Recognizing that there are local rules governing ADR administration, the ADR Committee further recommended that instead of proposing an immediate change to the Commercial Division Rules, OCA and the Statewide ADR Coordinator consult with the ADR Administrators in each Commercial Division location to determine whether their ADR Rules can be revised to include an initial five-day period for the parties to jointly select a mediator.

 

For those interested, the public comment period is open until August 20, 2018, and comments are to either be: emailed to rulescomments@nycourts.gov; or sent to John W. McConnel, Esq., Counsel, Office of Court Administration, 25 Beaver Street, 11th Fl., New York, New York 10004.

The New York Commercial Division was founded 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.” Among other things, its continual adoption of innovative new rules and amendments to existing rules has elevated the Commercial Division to being one of the world’s most efficient venues for the resolution of commercial disputes.

In our last installment of this blog’s Check the Rules series, we looked at the Commercial Division Advisory Council’s proposed amendment to Commercial Division Rule 17 concerning length of papers, along with some recent support from Commercial Division judges, including Justice Saliann Scarpulla of the Manhattan Commercial Division, whose decisions have taken lawyers to task for being long-winded.

It turns out that Justice Scarpulla also is an advocate of the efficiency associated with pretrial evidentiary hearings and immediate trials on material issues of fact under CPLR §§ 2218, 3211 (c), and 3212 (c), which, according to the Advisory Council in a recent new-rule proposal, are “significantly underutilized” and provide “yet another tool to help efficiently dispose of commercial disputes.”

Under the Advisory Council’s proposed new Rule 9-a, which essentially reinforces a court’s existing authority under the aforementioned CPLR provisions to direct evidentiary hearings, “parties are encouraged to demonstrate on a motion to the court when a pre-trial evidentiary hearing or immediate trial may be effective in resolving a factual issue sufficient to effect the disposition of a material fact of the case.” The proposed rule sets forth specific examples of such motions, including dispositive motions to dismiss and for summary judgment; preliminary-injunction motions; spoliation of evidence motions; jurisdictional motions; statute of limitations motions; and class action certification motions.

The idea behind proposed new Rule 9-a is to “expedite and streamline . . . questions of improper notice or other jurisdictional defects or dispositive defenses,” so as to avoid the kind of “litigation [that] continues for years through extensive discovery and other proceedings until trial where the fact issue is finally adjudicated and the case is resolved in a way that it might have been years ago.” In short, the proposed rule “is designed to reduce the waste of time and money which such situations create.”

As noted above, based on a couple recent decisions, it would appear that Manhattan Commercial Division Justice Saliann Scarpulla is on board with proposed Rule 9-a.

In January of this year, before Rule 9-a had even been proposed, Justice Scarpulla granted summary judgment for the plaintiff on a claim for breach of contract in a case called Seiko Iron Works, Inc. v Triton Bldrs. Inc. But because she was unable to “determine the total amount of damages to which [plaintiff w]as entitled based on the papers submitted,” Justice Scarpulla exercised her discretion under CPLR 3212 (c) to direct an evidentiary hearing on the material damages issues raised by the plaintiff’s dispositive motion.

Earlier this month, Justice Scarpulla expressly cited proposed Rule 9-a in a footnote to her post-hearing decision in Overtime Partners, Inc. v 320 W. 31st Assoc., LLC, a commercial landlord-tenant action seeking injunctive relief concerning the acceptance of a proposed sublessee under a master lease. After the tenant commenced the action by order to show cause, Justice Scarpulla “ordered a factual hearing to determine whether [the landlord] unreasonably withheld and delayed consent” to the proposed sublease. Citing CPLR 3212 (c) and footnoting proposed Rule 9-a, Justice Scarpulla expressly referenced her discretion thereunder to “order an immediate trial of an issue of fact raised by a motion when appropriate for the expeditious disposition of the controversy.”

Thus, it seems proposed Rule 9-a already is alive and well in the Manhattan Commercial Division, at least in spirit.  Look for its formal adoption in the near future.

As with all new-rule or rule-change proposals, anyone interested in commenting on proposed new Rule 9-a may do so by sending or emailing their comments to John W. McConnell, Esq. (rulecomments@nycourts.gov), Counsel, Office of Court Administration, 25 Beaver Street, 11th Floor, New York, NY 10004.

Two recent amendments to the Commercial Division Rules, designed to encourage alternative dispute resolution, will go into effect on January 1, 2018.ADR

The amendment to Rule 10 requires counsel to certify that they have discussed with their clients the availability of alternative dispute resolution options in their case. Specifically, counsel will be required to submit a statement at the preliminary conference, and at each subsequent compliance or status conference, certifying that counsel has discussed the availability of ADR with the client and stating whether the client is “presently willing to pursue mediation at some point in the litigation.”

If the parties indicate their willingness to mediate, the Rule 11 amendment will require counsel to jointly propose in the preliminary conference order a date by which the mediator shall be selected.

The new amendments ensure that the option to pursue mediation is communicated to parties at a relatively early stage in the case, before substantial legal fees are incurred in discovery and motion practice, and before parties become too steadfast in their respective positions. Moreover, by requiring counsel to discuss with their clients the possibility of ADR, the amendments provide a mechanism by which counsel can candidly discuss with their clients the “pros and cons” of ADR in a way that does not signal weakness or lack of confidence in their position.

The amendments to Rules 10 and 11 are in line with federal court local rules which similarly require counsel to discuss the possibility of ADR with their clients and adversaries (see e.g. S.D.N.Y. Local Rule 83.9(d) [“In all cases . . . each party shall consider the use mediation . . . and shall report” to court]; W.D.N.Y. Local Rule 16(b)(3)(B).

The new amendments do not in any way alter Rule 3 of the Commercial Division Rules, which permits the court to direct, or counsel to seek, the appointment of a mediator at any stage of the action.