Commercial Division Practice Guide
New York’s most complex business litigation actions are assigned to the Commercial Division within New York State’s Supreme Court. Tannenbaum Helpern’s litigators regularly appear in Commercial Division matters in New York, Westchester, Nassau, Kings and Queens Counties. This website provides updates, news, and resources to assist in navigating New York’s Commercial Division.
- Commercial Division Justices Webinar: Litigating in the Commercial Division During COVID-19
Commercial Division Justices Saliann Scarpulla (New York County), Timothy Driscoll (Nassau County), and Deborah Karalunas (Onondaga County) will discuss the operations and methods that the Commercial Division is using to move cases forward during the pandemic.
- E-filing of Motion Papers and Notices of Appeal Resume 5/4/20
Starting May 4, 2020, parties may file new motions, responsive papers to previously filed motions, notices of appeal, and other applications through the New York State Court’s e-filing system. This expansion does not, however, include the filing of new non-essential cases.
- Commercial Division Justice Remote Contact Information
The contact information for the chambers of the Commercial Division Justices throughout New York and information regarding special procedures and virtual conferences during the coronavirus pandemic.
- New York’s Virtual Courts Open for Business
The Commercial Division embraces technology as the coronavirus pandemic continues in New York. Commercial Division Justices begin conducting virtual conferences in pending cases.
- Cardozo Law Review Article: Reducing the Cost and Increasing the Efficiency of Resolving Commercial Disputes (10/18)
The article addresses major impediments to resolving commercial disputes efficiently and methods for reducing litigation costs and improving efficiencies.
- New Commercial Division Rule Takes Effect October 1, 2018: Encouraged Use of Technology-Assisted Review in Discovery
The new rule encourages parties to use the most efficient means to review electronically stored information including technology-assisted review, such as predictive coding, in appropriate cases
- Request for Public Comment on Amendment to Commercial Division Mediator Selection Rule
The proposed amendment will encourage counsel to work together to select a mediator because statistics show that parties are more likely to settle matters before a jointly approved mediator than before a mediator appointed by another method. Public comment on the proposed amendment must be received no later than August 20, 2018.
- Request for Public Comment on Amendment to Commercial Division Page Limit Rule
The proposed amendment will substitute word limits in place of the current page limits. Briefs, memoranda of law, affidavits and affirmations would be limited to 7000 words (instead of 25 pages) and reply memoranda would be limited to 4200 words (instead of 15 pages). Public comment on the proposed amendment must be received no later than May 15, 2018.
- Request for Public Comment on Amendment to Commercial Division Rule on Technology-Assisted Review in Discovery
The proposed amendment will encourage parties to use the most efficient means to review electronically stored information including technology-assisted review, such as predictive coding, in appropriate cases. Public comment on the proposed amendment must be received no later than May 15, 2018.
- Request for Public Comment on New Rule to Encourage Use of CPLR Provisions Permitting Immediate Trial or Pretrial Evidentiary Hearing on a Material Issue of Fact
The proposed rule will encourage parties within the Commercial Division to take advantage of certain CPLR provisions (2218, 3211(c), 3212(c)) that permit an immediate trial or pretrial evidentiary hearing on a material issue of fact. Public comment on the proposed rule must be received no later than May 15, 2018.
- Commercial Division Justice Alan D. Scheinkman Appointed As Presiding Justice of the Appellate Division Second Department
On January 1, 2018, Governor Cuomo appointed Westchester County’s Commercial Division Justice Alan D. Scheinkman as Presiding Justice of the Appellate Division Second Department. Justice Scheinkman was assigned to the Commercial Division in 2006 and has been serving as the Administrative Judge in Westchester County Supreme Court since 2009.
- Request for Public Comment on New Proposed Sample Claw-Back Language In Standard Commercial Division Confidentiality Stipulation and Order
Parties implementing the proposed claw-back language would agree to take reasonable steps to correct errors when protected information is inadvertently produced, return or destroy copies of inadvertently produced protected information upon request of the producing party, and waive challenges to the producing party’s review procedure or efforts to address the inadvertent disclosure. Public comment on the proposed rule must be received no later than January 16, 2018.
- New Commercial Division Rule Takes Effect January 1, 2018: Required Submission of ADR Statement At Every Court Conference
The new rule requires counsel to discuss alternative dispute resolution with their clients. Attorneys must submit a statement certifying the discussion and whether the party “is presently willing to pursue mediation at some point during the litigation” at the preliminary conference and at each subsequent Court conference.
- Commercial Division Justice Timothy Driscoll Discusses New Trial Affidavit and Time Limit Rules
Nassau County Commercial Division Justice Timothy Driscoll discusses the impact of two new Commercial Division rules that permit judges to require direct testimony by affidavit and limit the total number of trial hours. In addition to discussing the new rules and the reasons for their implementation, Justice Driscoll provides insight as to his application of the rules.
- Queens County Commercial Division Modifies Its Rules
As of April 3, 2017, all Queens County Commercial Division motions and proposed Orders to Show Cause must delineate “COMMERCIAL DIVISION” in boldfaced type on the front page of the notice of motion. Motions are also to be made returnable before the assigned Commercial Division Judge on their respective motion days. Failure to do so may result in the motion being marked off or administratively adjourned.
- Request for Public Comment on New Proposed Model Status Conference Stipulation and Order Form for Use in the Commercial Division
The proposed revised Commercial Division model status conference stipulation and order form modifies the previously issued forms and reflects rule changes over the last two years. It is a model and would not be mandatory. Public comment on the proposed rule must be received no later than August 25, 2017.
- Request for Public Comment on Amendment to Commercial Division Rules to Include a Sample Choice of Law Clause
The amended rule would include a sample choice of law provision in the appendix which may be used by parties in a pre-dispute context to select New York law to govern their disputes. Public comment on the proposed rule must be received no later than August 25, 2017.
- Request for Public Comment on Proposed Establishment of a Large Complex Case List in the Commercial Division
The Administrative Board of the Courts is seeking public comment on a proposal to establish a “Large Complex Case List” for the management of cases with a minimum of $50 million in alleged damages. Certain procedures would apply to cases on this list including employment of special referees and special mediators. The list would be piloted in New York County and expanded as appropriate. Public comment on the proposed rule must be received no later than July 25, 2017.
- Commercial Division Justices Oing and Singh Appointed to the Appellate Division First Department
On May 22, 2017, Governor Cuomo appointed New York County Commercial Division Justices Jeffrey K. Oing and Anil C. Singh to the Appellate Division First Department. Justice Oing was assigned to the Commercial Division in 2011 and Justice Singh was assigned to the Commercial Division in 2015.
- Request for Public Comment on New Proposed Rule to Address Alternative Dispute Resolution
The proposed Commercial Division rule will require counsel to submit a statement at the preliminary conference and each 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.” Public comment on the proposed rule must be received no later than June 5, 2017.
- Request for Public Comment on New Proposed Model Compliance Conference Stipulation and Order Form
The proposed revised Commercial Division model compliance conference stipulation and order form modifies the form issued in April 2015 and reflects rule changes over the last two years. It is a model and would not be mandatory. Public comment on the proposed rule must be received no later than May 30, 2017.
- New Commercial Division Rule Takes Effect July 1, 2017: Limiting Total Number of Trial Hours
The amended rule articulates the Commercial Division justices’ power to require estimates of, and to limit, the total number of hours of trial of Commercial Division matters.
- New Commercial Division Rule Takes Effect July 1, 2017: Requiring Supporting Papers With Notice of TRO Application
The amended rule requires a TRO applicant to provide their adversaries with advance copies of papers supporting the application for a TRO when they give notice of the application.
- New Commercial Division Rule Takes Effect May 1, 2017: Consultation on Expert Testimony in Advance of Trial
The new rule permits the Court to direct that prior to a pre-trial conference, counsel must consult in good faith to identify areas of expert testimony that are not in dispute and reduce any agreements to a written stipulation.
- New Commercial Division Rule Takes Effect April 1, 2017: Consent to Jurisdiction of the Commercial Dvision
The new section 202.70(d)(2) and Appendix C of the Commercial Division Rules allows parties to a contract to consent to the exclusive jurisdiction of the Commercial Division. A sample choice of forum provision is included in Appendix C.
- Commercial Litigator Rowan D. Wilson Nominated to the Court of Appeals by Governor Cuomo
Wilson’s career has focused on complex litigation including antitrust and competition, contracts, securities fraud, entertainment and media, and employment matters. If confirmed by the senate, Wilson will be the only Court of Appeals Justice with significant private commercial experience.
- Video - A Forum for Business Disputes: The Commercial Division of the Supreme Court of the State of New York
The Commercial Division Advisory Council released a new video on the evolution and benefits of the Commercial Division. The video includes commentary from Chief Judge Janet DiFiore, former Chief Judges Jonathan Lippman and Judith Kaye, attorneys that practice in the Commercial Division, and Commercial Division Judges.
- New Commercial Division Rule Takes Effect October 17, 2016: Direct Testimony by Affidavit
The new Rule 32-a of the Commercial Division Rules permits a Commercial Division judge to require that direct testimony of a party’s own witness in a non-jury trial or evidentiary hearing be submitted in affidavit form. The court, however, may not require the submission of a direct testimony affidavit from a witness who is not under the control of the party offering testimony.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule Addressing Consultation on Expert Testimony in Advance of Trial
The amended rule would permit the Court to direct that prior to a pre-trial conference, counsel must consult in good faith to identify areas of expert testimony that are not in dispute and reduce any agreements to a written stipulation. Public comment on the proposed rule must be received no later than December 20, 2016.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule Requiring Supporting Papers With Notice of TRO Application
The amended rule would require a TRO applicant to provide their adversaries with advance copies of papers supporting the application for a TRO when they give notice of the application.Public comment on the proposed rule must be received no later than January 10, 2017.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule to Include Sample Forum Selection Clause
The amended rule would include a sample choice of forum provision in the appendix which may be used by parties in a pre-dispute context to select the Commercial Division as their choice of forum. Public comment on the proposed rule must be received no later than December 20, 2016.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule Limiting Total Number of Trial Hours
The amended rule would articulate the Commercial Division justices’ power to require estimates of, and to limit, the total number of hours of trial of Commercial Division matters. Public comment on the proposed rule must be received no later than December 20, 2016.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule on Sealing of Sensitive Business Documents
The new rule would permit Commercial Division justices to seal documents for “good cause” to protect sensitive business information. Public comment on the proposed rule must be received no later than December 15, 2016.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule on Hyperlinking Requirement of E-Filed Documents
The new rule would permit Commercial Division justices the discretion to require hyperlinking in e-filed documents. The hyperlinked documents would also have to be e-filed separately. Public comment on the proposed rule must be received no later than December 5, 2016.
- The new Rule 3(b) of the Commercial Division Rules allows counsel to jointly request that the assigned Judge assign a different “settlement judge” to hold a settlement conference. The request will be granted at the discretion of the assigned Judge.
- New Commercial Division Rule Takes Effect July 1, 2016: Model Confidentiality Order
The new Rule 11-g of the Commercial Division Rules requires parties seeking a confidentiality order to use a model order included in the appendix to the rules. In the event that the attorneys choose to deviate from the model order, they are required to submit a red-lined copy of the order along with an explanation for the deviation.
- New Commercial Division Rule Takes Effect July 1, 2016: Rulings at Disclosure Conferences
The new Rule 14-a of the Commercial Division Rules allows the parties to prepare a proposed written order, with any resolutions reached at the conference, for the Justice’s signature or dictate any resolutions reached into the record. The new rule also includes a proposed stipulated order provision for telephone conference calls with the court whereby the parties submit a proposed order to the court within one business day of the call. The telephone conference section of the rule was not recommended by the Commercial Division Advisory Counsel and was added after the comments period concluded.
- THSH Article in the NYSBA Journal: Commercial Division Attorney Professionalism and Practice (June 2016)
How do you appropriately deal with an attorney that delays litigation at every turn? The Attorney Professionalism Forum addresses the topic including the application of new Commercial Division Rules.
- Proposed Commercial Division Rule: Request for Public Comment on New Rule Permitting the Court to Require Direct Testimony In Affidavit Form
The new rule would permit a Commercial Division judge to require that direct testimony of a party’s own witness in a non-jury trial or evidentiary hearing be submitted in affidavit form. This procedure is currently employed in federal and state courts and some judges find that it streamlines trials and facilitates crisper cross-examinations. Public comment on the proposed rule must be received no later than July 25, 2016.
- Event: What Happens Next? The New York County Commercial Division Judges Discuss the Application of the New Commercial Division Rules
A “Meet and Greet” with New York County Commercial Division Judges followed by a panel discussion concerning lessons to be drawn from the implementation of recent rule changes and prospects for further innovation. Tuesday, June 21, 2016 – Cravath, Swaine & Moore LLP NYC Office - 2 CLE Credits
- Event: An Evening With the Commercial Division Justices of Nassau and Suffolk Counties
A “Meet and Greet” with the Commercial Division Judges followed by a lively panel discussion: A Year in Retrospect. The New Commercial Division Rules and other current commercial litigation topics from the Judges' Perspective. Tuesday, June 21, 2016 – Melville Marriott - 2 CLE Credits
- Article from The New York Law Journal: Fraud Claims Arising From Contract Negotiations (4/15/16)
In the Commercial Division Update, the NYLJ looks at how the courts determine whether a viable fraud claim exists where a party alleges that it was defrauded during the negotiation of a commercial contract.
- Article from The Real Deal: The Judges Who Rule Over Real Estate (4/1/16)
The Real Deal profiles 6 New York County Commercial Division Justices that have overseen some of Manhattan’s biggest real estate cases over the past few years.
- Video: The Origins and Evolution of the Commercial Division
The Historical Society of New York Courts and the Commercial Division Advisory Council produced a brief documentary describing the origins and evolution of the Commercial Division with testimonials from the general counsel of major corporations.
- Article from The New York Law Journal: Deposition of Corporate Witnesses in Commercial Division Cases (3/16/16)
The NYLJ looks at the recent addition of Rule 11-f of the Commercial Division which permits a party to list topics on which it seeks to conduct deposition discovery which is consistent with FRCP 30(b)(6).
- News: Acting Justice Barry Ostrager is Designated to Sit in New York County’s Commercial Division (3/14/16)
It was announced that Justice Ostrager, a former partner and chair of Simpson Thacher & Bartlett’s litigation department, will be taking over most of the caseload of former Commercial Division Justice, and now Chief Administrative Judge, Lawrence Marks.
Beard v. Chase, 2017 N.Y. Slip Op. 50824(U) (New York County, J. Ramos – 6/19/17)
Acclaimed Photographer Declared Sole Owner of Works Allegedly Taken From His Apartment Pursuant to the Statute of Frauds
Plaintiffs alleged that three pieces of artwork were taken from acclaimed photographer Peter Beard’s apartment without his knowledge or consent. Justice Ramos granted partial summary judgment in favor of plaintiffs and held that the photographer was the sole owner of the works. The Court held that the receipts presented by defendants in support of their assertion of a contract did not clearly identify the parties, the specific artwork to be sold, or the time frame necessary to create an enforceable contract. In addition, Justice Ramos found that the facts did not fall within the specially manufactured goods exception to the statue of frauds because, among other reasons, the payments were not “unequivocally referable” to the sale of the works.
- Beard v. Chase, 2017 NY Slip Op. 50824(U) (Sup. Ct., New York, June 19, 2017)
- Key Terms: Art, Statute of Frauds, Summary Judgment, UCC 2-201
Picard v. Bigsbee Enters., Inc., 2017 NY Slip Op 50698(U) (Albany County, J. Platkin - 5/23/17)
Class Action Plaintiffs Granted Summary Judgment on Liability Where Restaurant Added Service Charge Without Distributing Funds to Servers
Plaintiffs in this class action alleged that they were servers at defendants’ restaurants which charged banquet customers an 18% or 20% “service charge” or “service personnel charge” but did not distribute these funds to the servers in violation of Labor Law 196-d. Pursuant to New York State Department of Labor regulation 12 NYCRR 146-2.18 [b], there is a rebuttable presumption, “that any charge in addition to charges for food, beverage, lodging, and other specified materials or services . . . is a charge purported to be a gratuity.” Justice Platkin held that defendants did not submit any proof showing that they complied with the regulation, the defendants’ sales personnel referred to the service charge as a gratuity, and granted partial summary judgment for the post 2011 subclass plaintiffs on the issue of liability finding the “service” and “service personnel” charges to be gratuities.
- Picard v. Bigsbee Enters., Inc., 2017 NY Slip Op 50698(U) (Sup. Ct., Albany County, May 23, 2017)
- Key Terms: Employment, Gratuities, Class Action, Labor Law
Americore Drilling & Cutting, Inc. v EMB Contr. Corp., 2017 NY Slip Op 50441(U) (Queens County, J. Dufficy - 4/3/17)
Corporate Veil Pierced in Bench Trial Decision on Oral Contract
Following a bench trial, Justice Timothy J. Dufficy awarded plaintiff Americore Drilling & Cutting, Inc. $118,000 for extra work it rendered pursuant to an oral contract with defendant EMB Contracting Corp. Pursuant to the parties’ oral contract, which the Court found to be enforceable because it could be performed within one year, plaintiff agreed to cut concrete balconies for a hotel being constructed in Long Island City. The Court held that plaintiff could pierce the corporate veil to sustain breach of contract claims against both defendant EMB, which was in privity with plaintiff, and Chilled Properties which the court ruled was created as part of a scheme to prevent the plaintiff from collecting payments due by EMB.
- Americore Drilling & Cutting, Inc. v EMB Contr. Corp., 2017 NY Slip Op 50441(U) (Sup. Ct., Queens, April 3, 2017)
- Key Terms: Breach of Contract, Unjust Enrichment, Oral Agreement, Fiduciary Duty, Piercing the Corporate Veil
Kaloyeros v. Fort Schuyler Mgt. Corp., 49 N.Y.S.3d 867 (Albany County, J. Platkin – 3/24/17)
Director of Not-For-Profit’s Bid for Legal Fees and Expenses Denied
Justice Richard Platkin denied a motion for a preliminary injunction seeking declaratory judgment that two not-for-profit corporations were required to indemnify a former director for legal fees and expenses incurred in connection with pending federal and state criminal prosecutions. The Court held that plaintiff did not demonstrate a likelihood of success for statutory indemnification or his claim for promissory estoppel with the proof presented (an unverified Complaint and an affirmation by his counsel). Moreover, plaintiff presented no sworn representation that the failure to obtain advanced legal fees would prejudice his defense in any manner much less constitute irreparable harm.
- Kaloyeros v. Fort Schuyler Mgt. Corp., 49 N.Y.S.3d 867 (Sup. Ct. Albany, March 24, 2017)
- Key Words: Preliminary Injunction, Attorneys’ Fees, Not-For-Profit
Gordon v. Verizon Communications, Inc., 2017 NY Slip Op 00742 (1st Dept reversing New York County, J. Schweitzer - 2/2/17)
First Department Adds Two Factors in Review of Nonmonetary Class Action Settlements
Verizon Communications, Inc. entered into a stock purchase agreement with Vodafone Group PLLC to acquire Vodafone subsidiaries. Following the commencement of a class action suit against Verizon’s board of directors, the parties negotiated a settlement. Justice Schweitzer held a fairness hearing and denied approval of the settlement and plaintiff’s attorney’s fees award holding that the disclosures that were part of the settlement did not benefit the shareholder class. The First Department reversed Justice Schweitzer’s decision and refined the 5 factor Colt standard of review by adding two new factors: “Whether the proposed settlement is in the best interests of the putative settlement class as a whole, and whether the settlement is in the best interest of the corporation.” Justice Moskowitz concurred with the majority’s decision to approve the settlement, but stated that the addition of the two new factors was unnecessary.
- Gordon v. Verizon Communications, Inc., 2017 NY Slip Op 00742 (1st Dept 2017)
- Key Terms: Class Action, Nonmonetary Settlement, Colt Factors
DeCristofaro v Nest Seekers E. End, L.L.C. (Suffolk County, J. Emerson – 1/11/17)
Directed Verdict Denying Plaintiff's Claim of De Facto Partnership in Real-Estate Brokerage
Plaintiff entered into an agreement with defendent giving him a marketing title of "EVP, Managing Partner" and requiring the parties to make best efforts to convert the agreement into an operating partnership agreement. Although proposed agreements were circulated, the parties did not enter into a partnership agreement. Although proposed agreements were circulated, the parties did not enter into a partnership agreement and the relationship between the LLC and the plaintiff deteriorated. Plaintiff commenced this action claiming the existence of a partnership. Justice Emmerson analyzed a number of factors to determine whether a de facto partnership. Justice including the sharing of losses, the lack of K-1 form, ownership of assets, capital contributions, and management and control. The court found that Plaintiff failed to establish a de facto partnership. Further, plaintiff's lack of a real-estate brokerage LLC under Real Property Law § 441-b.
- DeCristofaro v Nest Seekers E. End, L.L.C., 2017 NY Slip Op 50074(U) (Sup. Ct., Suffolk County January 11, 2017)
- Key Terms: Real-Estate Brokerage; De Facto Partnership
Benzies v. Take-Two (New York County, J. Ostrager - 12/19/16)
Multi-Faceted Complaint Filed by Creator of Grand Theft Auto Video Game Reduced to Breach of Contract Action
Leslie Benzies, the creator of the "Grand Theft Auto" video game franchise, brought suit against Take-Two Interactive Software, Inc. and its more widely-known affiliate Rockstar Games Inc. alleging that he was improperly ousted as a shareholder of the company and deprived of royalties. In his 71-page complaint originally filed in federal court, and later removed to the Commercial Division, Benzies alleged that he was constructively discharged, fraudulently induced to enter into unfair agreements, and that the defendants defamed him, were unjustly enriched at his expense, and breached fiduciary duties owed to him. Relying primarily on the plain text of the various agreements between the parties, Justice Barry R. Ostrager ruled that, with the exception of Benzies' defamation claim (which was improperly pleaded), all of Benzies' claims derived from his breach of contract claims and were dismissed.
- Benzies v. Take-Two, Sup Ct, New York County, December 19, 2016, Ostrager, J., index No. 651920/16
- Key Terms: Breach of Contract, Defamation, Unjust Enrichment, Agreement, Fiduciary Duty, Derivative
Justinian Capital SPC v. WestLB AG (Court of Appeals, affirming 1st Dept, affirming New York County J. Kornreich – 10/27/16)
Doctrine of Champerty’s Safe-Harbor Exception Only Applies When There is a Bona Fide Obligation to Pay
The Court of Appeals discussed the seldom-referenced doctrine of champerty, which prohibits an individual or entity from buying or taking an assignment of notes or other security instruments “with the intent and for the purpose of brining an action or proceeding thereon.” See New York Judiciary Law 489. In recognition of New York’s status as a leading commercial center, the statute provides a safe-harbor under which transactions with an aggregate purchase price of at least $500,000 are exempt from the statute’s prohibition. With this background, the Court dismissed the action finding that although the purchase price was over $500,000, the arrangements in this case did not create a bona fide obligation to pay because payment of the purchase price was contingent on a successful litigation outcome.
- Justianian Capital SPC v. WestLB AG, 28 N.Y.3d 160 (2016)
- Key Terms: Champerty, Motion to Dismiss
Tai Huang v Northern Star Management L.L.C. (New York County, J. Ramos – 10/24/16)
Minority Members Denied TRO Seeking to Prevent LLC Freeze-Out Merger
Justice Ramos denied a TRO brought by minority members of an LLC holding a collective interest of 27.50% in one of the defendants that was merging with the other defendant. The majority members of the LLC approved the merger and cashing out of the remaining minority members including the plaintiffs. Justice Ramos ruled that the clear language of the LLC’s operating agreement only required the consent of the majority members and not the majority of the disinterested members. Accordingly, the plaintiffs, as minority members, could not prevent the merger.
- Tai Huang v Northern Star Mgt. L.L.C., 2016 NY Slip Op 32194(U) (Sup. Ct., New York County October 24, 2016)
- Key Terms: Temporary Restraining Order; LLC; Freeze-Out Merger
MP Cool Investments Ltd. v. Forkosh (1st Dept affirming New York County, J. Kornreich - 9/1/16)
Sophisticated Investor Did Not "Justifiably Rely" on Company's Representations to Support Fraud Allegations
The First Department affirmed the opinion of New York County Commercial Division Justice Shirley Werner Kornreich that experienced investors are held to a higher standard when it comes to pleading fraud. In MP Cool Investments, the plaintiff, a majority shareholder of HVAC company DuCool, Ltd., filed suit against the former-majority shareholders of the company alleging that they intentionally provided the plaintiff with false investment information. Specifically, the plaintiff claimed that it had been induced to repeatedly invest in the company based on the defendants' representations that DuCool's products were more technologically advanced than others on the market. Affirming the Commercial Division opinion dismissing the complaint, the First Department held that plaintiff's fraud claims were deficient because not only did they lack the particularity required by the CPLR, they did not establish "justifiable reliance" to prove fraud because the plaintiff was a "sophisticated investor that had the means available to learn the true nature and real quality of [its] investment."
- MP Cool Investments Ltd. v. Forkosh, 142 A.D.3d 286 (1st Dept 2016)
- Key Terms: Fraud, Pleadings, Investor, Investment, Shareholder, Reliance
Michael R. Gianatasio, PE, P.C. v City of New York (New York County, J. Kornreich – 8/26/16)
Contractor's Claim For Unpaid Work by NYC Dismissed Where ACS Entered Into Illegal Contract
Plaintiff construction company was not fully paid for its work on the construction of ACS facilities. Justice Kornreich stated, “[t]here is no doubt that the City acted unlawfully and treated [Plaintiff] unfairly.” The Court, however, was precluded from enforcing the contracts against the NYC defendants because the subject contract did not comply with procurement requirements. “It does not matter that the municipality or its agents violated the law. The very purpose of prohibiting the enforcement of illegal contracts with municipalities is 'to protect the public from corrupt or ill-considered actions of municipal officials.'”
- Michael R. Gianatasio, PE, P.C. v City of New York, 53 Misc 3d 757 (Sup. Ct., New York County August 26, 2016)
- Key Terms: Illegal Contract; Motion to Dismiss
Integra Optics, Inc. v. Messina (Albany County, J. Platkin – 7/15/16)
Unclean Hands Prevents Employer from Receiving a Preliminary Injunction to Enforce Non-Compete Agreement
The Commercial Division in Albany County denied an employer’s motion for a preliminary injunction to enforce the terms of a non-competition agreement after finding sufficient evidence demonstrating that the former-employee signed the agreement under duress, thereby seriously questioning the employer’s ultimate likelihood of success on the merits. Despite first finding that the employer achieved its initial burden demonstrating entitlement to a preliminary injunction, the court ultimately found the former-employee’s credible and substantial evidence of duress tipped the balance of equities away from an award of preliminary injunctive relief under the doctrine of unclean hands.
- Integra Optics, Inc. v. Messina, 52 Misc. 3d 1210(A) (Sup. Ct., Albany County July 15, 2016)
- Key Words: Preliminary Injunction, Duress, Unclean Hands
Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616 (Court of Appeals, reversing 1st Dept, reinstating New York County J. Bransten - 6/9/2016)
Court of Appeals Restricts the Common Interest Privilege
In one of the most significant decisions of 2016, the Court of Appeals held that the common interest privilege – the doctrine that historically allowed attorneys and clients to share privileged information with third-parties with a common legal interest – now only applies when litigation is pending or reasonably anticipated. Rejecting the more expansive application of the common interest privilege practiced by federal courts and the First Department, the Court of Appeals reasoned that the doctrine should be limited to “situations where the benefit and the necessity of shared communications are at their highest, and the potential for misuse is minimal.”
- Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616 (2016)
- Key Terms: Common Interest Priviledge, Attorney-Client Priviledge, Commercial Transaction(s), Third Parties
GE Oil & Gas, Inc. v. Turbine Generation Services, L.L.C. (New York County, J. Kornreich – 5/27/16)
Anti-Suit Injunction Warranted Where Party Seeks to Collaterally Challenge Court’s Judgment in a Foreign Action
Justice Kornreich granted an anti-suit injunction against a defendant after plaintiff obtained a summary judgment ruling in New York and the defendant sought to collaterally challenge that ruling in a Louisiana State court action. The court also found the defendant in contempt of court due to its violation of the court’s order by seeking to enjoin the New York action in the Louisiana State Court action. The defendant, however, can purge the contempt by discontinuing the Louisiana State Court action within 14 days.
- GE Oil & Gas, Inc. v Turbine Generation Services, L.L.C., 51 Misc 3d 1226(A) (Sup. Ct., New York County May 27, 2016)
- Key Terms: Anti-Suit Injunction, Contempt, Parallel Action, Foreign Litigation
Romanoff v. Center for Rheumatology, LLP (Albany County, J. Platkin - 5/24/16)
“Distributable Goodwill” Possibly Available to Departing Partners in the Absence of Implied or Express
Agreement to the Contrary
Justice Platkin determined that there is a question of fact as to whether the goodwill of the medical professional partnership is a distributable asset in Romanoff. The partners taking over the practice failed to affirmatively demonstrate that the medical center lacked the ability to attract patients as a result of its name, location and reputation. The Court also ruled that, at the summary judgment stage of the litigation, there was no evidence of an express agreement between the plaintiff doctor and his former partners that excluded goodwill from the practice’s distributable assets. Reciting the Court of Appeals’ decision inMatter of Brown, 242 N.Y. 1 (1926), the Court emphasized that “[g]ood will, when it exists as incidental to the business of a partnership, is presumptively an asset to be accounted for.”
- Romanoff v. Center for Rheumatology, LLP, 2016 NY Slip Op 50856(U) (Sup. Ct., Albany County May 24, 2016)
- Key Terms: Distributable Goodwill, Partnership
In the Matter of Kenneth Cole Productions, Inc., Shareholder Litigation (Court of Appeals, affirming 1st Dept. & NY County J. Marks -5/15/16)
NY Court of Appeals Adopts Delaware’s Standard of Review for “Going-Private” Mergers
The New York Court of Appeals endorsed the Delaware Supreme Court’s hybrid standard of review for going-private mergers. When faced with shareholder challenges to these types of mergers, the Court held that the business judgment rule is properly applied when six shareholder-conscious conditions are met: “(i) the controller conditions the procession of the transaction on the approval of both a Special Committee and a majority of the minority stockholders; (ii) the Special Committee is independent; (iii) the Special Committee is empowered to freely select its own advisors and to say no definitively; (iv) the Special Committee meets its duty of care in negotiating a fair price; (v) the vote of the minority is informed; and (vi) there is no coercion of the minority”. In the absence of these protections, however, the entire fairness standard should be applied.
- In re Kenneth Cole Productions, Inc., Shareholder Litig., 2016 NY Slip Op 03545 (2016)
- Key Terms: Merger, Business Judgement Rule, Entire Fairness Standard, Shareholder
Calltrol Corporation v. DialConnection, LLC (Westchester County, A. Scheinkman – 5/10/2016)
Commercial Division Examines Tolling of Statute of Limitations and Whether Transaction is Governed by the UCC
Justice Alan D. Sheinkman denied a motion to dismiss due to questions of fact regarding a statute of limitations defense. The defendant was licensed by the plaintiff to resell software. The Court held that questions of fact existed as to whether partial payment was made by the defendant before or after the statute of limitations had expired and whether defendant issued written acknowledgment of the debt to the plaintiff with an intention to pay. The Court also ruled that further discovery was needed to determine whether the four-year (UCC) or six-year (CPLR) statute of limitation period applied to plaintiff’s breach to contract cause of action.
- Calltrol Corporation v. DialConnection, LLC, 2016 NY Slip Op 50765(U) (Sup. Ct., Westchester County May 10, 2016)
- Key Terms: Breach of Contract, Statute of Limitations, Motion to Dismiss, UCC
Peter Hammond v. Bruce W. Smith (Monroe County, J. Rosenbaum – 4/22/2016)
Commercial Division Rules Parties’ General Interest Does Not Create Partnership
On the eve of trial, Justice Matthew A. Rosenbaum granted summary judgment in favor of the defendant finding that a partnership agreement did not exist between the parties. The Court ruled the parties’ general interest in creating a partnership did not equate to the actual creation of a partnership. Where there was no agreement to share profits or losses, the parties did not verbally agree to form a partnership, and the defendant was solely liable to the creditors, there were no genuine issues of material fact as to the creation of a partnership.
- Peter Hammond v. Bruce Smith, 2016 NY Slip Op 50670(U) (Sup. Ct., Monroe County April 22, 2016)
- Key Terms: Partnership, Summary Judgment
The Irish Dairy Bd. Cooperative Ltd. v Pryor Cashman LLP (NY County – J. Scarpulla - 4/19/16)
Legal Malpractice Action Arising Out of Human Resources Audit Survives Motion to Dismiss
The defendant law firm, Pryor Cashman, was hired to provide plaintiffs with a labor and employment audit of its human resource practices and policies in the United States. After the audit, one of the plaintiffs was sued in a class action for violations of California wage and hour laws. Plaintiffs brought a legal malpractice action against defendant for failing to properly identify the issues for which it was sued. Justice Scarpulla granted Pryor Cashman’s motion to dismiss as to a number of plaintiffs due to the lack of an attorney-client relationship. However, Justice Scarpulla found that plaintiffs adequately alleged the existence of an attorney-client relationship between one of the plaintiffs and the defendant and plaintiffs sufficiently alleged the defendant’s failure to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession. The breach of fiduciary duty and breach of contract causes of action were dismissed as duplicative of the legal malpractice cause of action.
-The Irish Dairy Bd. Cooperative Ltd. v. Pryor Cashman LLP, 2016 WL 1597762 (Sup. Ct., NY County Apr. 19, 2016)
- Key Terms: Legal Malpractice, Breach of Fiduciary Duty, Breach of Contract, Labor and Employment Audit
Freidman v Yakov (1st Department - 4/19/16)
Appellate Division Upholds Attorney Sanctions For Conduct at Deposition in Commercial Division Case
The First Department upheld Justice Bransten’s decision awarding sanctions for attorney’s frivolous conduct at a deposition. The attorney’s conduct included speaking objections, profanity, multiple directions not to answer questions, and communication with a client without explanation. The sanction was the costs and legal fees for the sanction motion as well as the fees associated with the continued deposition.
-Freidman v Fayenson, 41 Misc 3d 1236(A) [Sup Ct 2013], affd sub nom Freidman v Yakov, 2016 NY Slip Op 02944 [1st Dept 2016]
-Key Terms: Deposition, Attorney Sanctions, Speaking Objections, Profanity, Frivolous Conduct
Universal Investment Advisory, SA, et al. v Bakrie Telecom PTE, Ltd., et al. (NY County, J. Scarpulla – 4/18/16)
Commercial Division Refuses to Bind Non-Signatories to a Forum Selection Clause
Justice Saliann Scarpulla held that the Court lacked personal jurisdiction over a company’s commissioners, directors, and controlling shareholders in their individual capacities. Rejecting the plaintiffs’ argument that these individual defendants were bound by the New York forum selection clause contained in notes, guarantees and an indenture, by virtue of the “closely-related” theory, the Court found no “objective evidence of their intent to be bound.”
-Universal Investment Advisory, SA, et al. v. Bakrie Telecom PTE, Ltd., et al., 2016 NY Slip Op 50631(U) (Sup. Ct., NY County Apr. 18, 2016)
-Key Terms: Forum Selection Clause, Personal Jurisdiction, Motion to Dismiss, Closely-Related Theory
Bonanni v Horizons Invs., Corp. (Suffolk County, J. Emerson - 3/9/16)
Derivative Action Bench Trial Verdict
In a bench trial decision in a derivative action, the court awarded damages to plaintiff for the defendants’ breach of fiduciary duty, unjust enrichment, breach of contract, and conversion. The action involved a dispute between members of an LLC that provided MRI services to patients at hospitals.
-Bonanni v Horizons Invs., Corp., 50 Misc 3d 1227(A) [Sup Ct 2016]
-Key Terms: Derivative Action, Breach of Fiduciary Duty, Unjust Enrichment, Conversion
- Statewide Commercial Division Rules
- Commercial Division Rule Changes and Their History:
New York Stat Commercial Division Rule Changes Since September 2013
22 NYCRR 202.70
Subject of Rule Change
|Confer Before Preliminary Conference on ESI Discovery||8(b)||Memo||AO-227-12 AO-228-13|
|Model PC Order||7||Memo||Repealed by AO132-2016|
|Accelerated Adjudication Procedure||9||Memo||AO-77-14|
|Pilot Mandatory Mediation Program||3||Memo||AO1stJD623-14|
|Pilot Special Masters Program||Memo||AO-120-14|
|Assignment of Cases to Commercial||(d), (e)||Memo||AO-117-14 AO117a-14|
|Electronically Stored Information Discovery From Non-Parties||11(c)||Memo||AO-133-14|
|Settlement Related Disclosure||8||Memo||AO-119-14|
|Staggered Court Appearances||34||Memo||AO-131-14|
|Limits on the Number and Duration of Depositions||11-d||Memo||AO-336a-14|
|Responses and Objections to Document Demands||11-e||Memo||AO-36-15|
|Compliance Conference Order||7||Memo||AO-35-15|
|Depositions of Entity Representatives||11-f||Memo||AO-160-15|
|Proportionality in Discovery||(g) Preamble||Memo||AO-159-15|
|Eligibility of Cases for Commercial Division||(b), (c)||Memo||AO-161-15|
|Model Compliance Conference Order||Memo||AO-162-15|
|Summary Jury Trials||3||Memo||AO-163-15|
|Bookmarks in Electronically Submitted Documents||6||Memo||AO-164-15|
|Settlement Conferences Before Nonassigned Justice||3(b)||Memo||AO-121-16|
|Revised Model PC Order||7||Memo||AO-132-16|
|Memorialization of Conference Orders||14-A||Memo||AO-128-16|
|Model Confidentiality Order||11-g||Memo||AO-131-16|
|Direct Testimony in Affidavit Form||32-a||Memo||AO-190-16|
|Hyperlinking in E-Filed Documents||6||Memo||PROPOSED ONLY|
|Sealing of Court Records||11-h||Memo||PROPOSED ONLY|
|Trial Time Estimates and Limits||26||Memo||AO-64-17|
|Sample Forum Selection Clause||(d), Appendix C||Memo||AO-116-17|
|Consultation on Expert Testimony||30(c)||Memo||AO-34-17|
|Copies of Supporting Papers With Notice of TRO||20||Memo||AO-71-17|
|Revised Model Compliance Conference Order||Memo||AO-206-17|
|ADR Certification for Conferences||10,11||Memo||AO-202-17|
|Large Complex Case List||Memo||AO-203-17|
|Sample Choice of Law||(d), Appendix D||Memo|
|Revised Model Status Conference Stipulation and Order Form||Memo||AO-205-17|
|Claw-Back Provision in Confidentiality Stipulation and Order||11-g(c), (d)||Memo||AO- 150-18|
|Technology-Assisted Review in Discovery||11-e||Memo||AO-242-18|
|Immediate Trial or Pretrial Evidentiary Hearing on Material Issue of Fact||9-a||Memo||AO-243-18|
|Selection of Mediators||3||Memo||PROPOSED|