NY Commercial Division Blog

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Patterson Belknap’s Commercial Division Blog covers developments related to practice and case law in the Commercial Division of the New York State Supreme Court.  The Commercial Division was formed in 1993 to enhance the quality of judicial adjudication and to improve efficiency in the case management of commercial disputes that are litigated in New York State courts. Since then, the Division has become a leading venue for judicial resolution of high-stakes and every-day commercial disputes.  This Blog reviews key developments in the Commercial Division, including important decisions handed down by the Commercial Division, appellate court decisions reviewing Commercial Division decisions, and changes and proposed changes to Commercial Division rules and practices.  Our aim is to provide you with thoughtful and succinct analysis of these issues.  The Blog is written by experienced commercial litigators who have substantial practices in the Commercial Division. It is edited and managed by Stephen P. Younger and Muhammad U. Faridi, who spearheaded the publication of the New York Commercial Division Practice Guide, which is part of Bloomberg Law's Litigation Practice Portfolio Series.

Repeal of Rule 23: the 60-Day Rule

On June 23, 2020, Chief Administrative Judge Marks approved the repeal of Rule 23 of the Commercial Division Rules.  Rule 23 (known as the “60-Day Rule”) required movant’s counsel to notify the court and other parties whenever a motion had not been decided within 60 days of its submission or oral argument. 

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Virtual Court May Be the New Normal in New York City, At Least For Now

Although New York City’s state court judges are now back in their chambers, in-person hearings have not yet commenced. 

Administrative Judge Deborah A. Kaplan reported that her division has had success using “video-linked ‘virtual’ hearings for a wide range of matters.” In-person hearings will still be available when truly necessary.  For example, this option may be available to self-represented litigants without access to the requisite technology. 

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Chief Judge DiFiore Announces Expanded In-Person Court Services in Five Upstate Regions

On June 15, 2020, Chief Judge DiFiore announced that the five upstate regions—Finger Lakes, Central New York, Mohawk Valley, Southern Tier, and North Country—that began Phase III reopening last Friday, June 12, will expand the number of in-person functions in their courthouses beginning June 17. Accordingly, these regions will now handle in-person matters including a limited number of bench trials in civil matters.

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Amendment to Rule 1 Allowing Video Appearances

On June 16, 2020, Chief Administrative Judge Marks approved an amendment to Rule 1 to the Commercial Division Rules.  The amendment is designed to allow counsel to request the court’s permission to appear though videoconferencing and other similar technology.

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In a Valuation Dispute, Commercial Division Refuses to Credit “Unrealistic and Optimistic” Projections Made by a Corporation in Obtaining a Loan

A recent Commercial Division decision provides an example of a court rejecting “unrealistic and optimistic” business projections in determining the valuation of a petitioner’s shares in a corporation.  In Magarik v. Kraus USA, Inc., Index No. 606128/2015, Doc. No. 252 (Sup. Ct., Nassau Cnty. Apr. 28, 2020), Justice DeStefano refused to credit the valuation made by the petitioner’s expert, which depended heavily on a set of projections that the corporation at issue made in the process of obtaining a loan.

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Updates on COVID-19’s Impact on Commercial Appeals: New York Court of Appeals Expands Digital Filings, While the Appellate Division Lifts Moratorium on Filing Deadlines and Hears Skype Argument

Originally published May 21, 2020.

The progress of taking commercial appeals in New York has been impacted significantly by the onset of the COVID-19 pandemic.  Deadlines for perfecting appeals were suspended and oral arguments were canceled. Although Skype conferences were being held in the trial level courts, such as the Commercial Division, arguments were not being scheduled on typical appeals. Recently, as Chief Judge Janet DiFiore has overseen a gradual re-opening of significant portions of the New York courts, there have been material developments in appellate practice which affect commercial litigators.  These developments reflect a sense that appeals are starting to move forward again, albeit with the naturally attendant backlogs that the COVID-19 crisis has engendered.

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Commercial Division Denies Cross-Petitions to Confirm and Vacate Appraisal Award Despite Strong Presumption in Favor of Summarily Confirming Such Awards

In Yakuel v. Gluck, Justice Joel M. Cohen of the New York County Commercial Division denied Petitioners’ application to confirm an appraisal award and denied Respondent Andrew Gluck’s (“Gluck”) cross-petition to vacate the same award in connection with the appraisal of Gluck’s ownership interest in Agency Within LLC (“Agency Within”), a digital marketing company.  The opinion addressed the legal standard for confirming or vacating an appraisal award pursuant to CPLR § 7601, as well as a party’s right to present evidence to an appraiser over the objection of a counterparty.

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Presiding Justices of the Appellate Division Participate in Virtual Town Hall

The COVID-19 pandemic has had considerable effect on appellate practice in New York State’s intermediary appellate court, the Appellate Division.  The last months have seen historical firsts, such as all four appellate departments hosting virtual oral arguments on Zoom and Skype.  Many parties have not had the opportunity to take part in oral argument, as their cases have been decided on submission or adjourned.  The four departments have issued a flurry of notices to the bar revising their rules of practice and many of these changes could very well be permanent. 

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Five Upstate Judicial Districts Begin Phase II of In-Person Court Operations

Chief Judge Janet DiFiore and Chief Administrative Judge Lawrence K. Marks announced that courts in the Fifth Judicial District, Sixth Judicial District, and Seventh Judicial District will enter Phase II of re-opening on June 3, 2020, and it will expand to the Eighth Judicial District and Fourth Judicial District on June 5, 2020. 
 

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New York State Courts Begin Reopening Process As Some Upstate Regions Meet Initial State Reopening Criteria

Chief Judge Janet DiFiore recently announced that New York state courts have begun the process of re-opening the in-person court system and increasing the capacity of new matters that may be filed in New York state courts.  The courts that are beginning the physical reopening process are located within New York’s Third, Fourth, Fifth, Sixth, Seventh, and Eighth judicial districts.  Those districts roughly cover the regions of New York that do not include New York City and the surrounding suburbs.  Electronic filing of new non-essential cases also, to the extent permissible prior to the COVID-19 crisis, resumed on Memorial Day, May 25th, 2020.

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    E-Filing of New, Non-Essential Matters to Resume

    On May 20, 2020, Justice Lawrence Marks, the Chief Administrative Judge of the New York Unified Court System, issued a memorandum announcing that, effective May 25, 2020, “e-filing through the NYSCEF system – including the filing of new non-essential matters – will be restored in those counties of the state that have not yet met the benchmarks required to participate in the Governor’s regional reopening plan.”  Those counties include the five counties that comprise New York City, as well as Nassau, Suffolk, Dutchess, Orange, Putnam, Rockland, Sullivan, Ulster, and Westchester.

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    First Department Holds That “Sole and Absolute Discretion” Clause Does Not Preclude Breach of Fiduciary Duty Claim

    In Shatz v. Chertok, the First Department affirmed in part and reversed in part a decision by Justice Jennifer G. Schechter of the Commercial Division. The key issue on appeal was whether a New York limited liability company’s operating agreement that provided the managing member “sole and absolute discretion” over investment decisions barred a derivative claim for breach of fiduciary duty.  The First Department held that this contractual language did not bar a breach of fiduciary duty claim against the company’s manager.

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    Commercial Division Justices Discuss Litigating During COVID-19

    On Monday, May 11, 2020, three Commercial Division justices from across the state participated in a virtual panel to discuss the state of litigating in the Commercial Division during COVID-19.  Justices Saliann Scarpulla (New York County), Timothy Driscoll (Nassau County), and Deborah Karalunas (Onondaga County) discussed the ways in which litigation can move forward while the courts operate in a virtual format.  The panel was presented by the New York State Bar Association’s Commercial and Federal Litigation Section.

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    Phase One Re-Opening of In-Person Court Operations

    On May 13, 2020 the New York State Unified Court System announced a plan for the gradual return of judges, clerks, and court staff to courthouses in select upstate counties—with litigants being able to electronically file new cases in those counties.[1] 

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    Commercial Division Reiterates That Claims Based on Harm to All Members of LLC are Derivative

    The issues related to the bringing of claims involving a cancelled LLC were addressed in the Commercial Division’s recent decision in Hopkins v. Ackerman.  In November 2019, Justice Saliann Scarpulla dismissed most of Hopkins’s and his co-plaintiffs’ claims as derivative, and therefore unable to be brought on behalf of a cancelled LLC.  We covered that decision here.  Following that decision, Hopkins sought leave to bring additional direct claims, but Justice Scarpulla’s recent decision rejected all but one of the proposed claims—a breach of fiduciary duty claim based on allegations that Hopkins was frozen out of decision-making and membership rights.  The other claims were rejected as derivative because they concerned the alleged failure to distribute the LLCs’ assets, a harm felt equally by all members.  Justice Scarpulla also reaffirmed her earlier ruling that a challenge to an LLC’s cancellation status (which could re-open the door to derivative claims) must be brought in Delaware, where the entities were established and cancelled.

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    Governor Andrew Cuomo Extends Tolling of Statute-of-Limitations

    On May 7, 2020, New York Governor Andrew Cuomo issued Executive Order 202.28, which, among other things, “continue[d] the suspension and modifications of laws, and any directive, not superseded by a subsequent directive, made by Executive Order 202 and each successor Executive Order up to and including Executive Order 202.14, for thirty days until June 6, 2020, except as modified” in the May 7, 2020 Executive Order.

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    Commercial Division Dismisses Derivative Shareholder Suit for Failure to Provide New Allegations of Pre-Suit Demand in an Amended Complaint

    In derivative shareholder actions, New York law requires a plaintiff-shareholder seeking to vindicate the rights of a corporation to plead, with particularity, either that before filing suit a request was made on the corporation’s board of directors to initiate the action or that any such demand, if made, would have been futile.[1]  This pre-suit demand requirement may seem straightforward in theory, but a March 19, 2020 Commercial Division decision by Justice Andrea Masley serves as a cautionary reminder of tricky nuances in its application. 

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    New York Courts Expand Virtual Operations Amid COVID-19 Emergency

    Updated

    May 4, 2020 - Update: On May 4, 2020 Chief Administrative Judge Marks promulgated an order that codifies the new policies delineated in his memorandum of April 30, 2020 and discussed in the below “Update” of May 1, 2020.

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    COVID-19 Webinars Presented by Editors of the Blog

    On April 17, 2020, Stephen Younger, Muhammad Faridi, and Timothy Smith presented a webinar for the Practicing Law Institute titled “COVID-19’s Impact on Commercial Transactions and Disputes.” This one-hour program addressed the legal challenges that many businesses may be facing in the wake of the pandemic.  Muhammad and Tim discussed...
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    Chief Judges Announce Plan for Virtual Court Proceedings and Resumption of Non-Essential Matters in the Commercial Division and Other Courts

    Updated

    Update: Chief Administrative Judge Marks has promulgated an order that makes the plans detailed below effective as of April 13, 2020.  The order also notes that video conferences will be administered exclusively through Skype for Business.

    As an update to our earlier post on COVID-19’s effect on the Commercial Division, Chief Judge Janet DiFiore and Chief Administrative Judge Lawrence K. Marks recently announced that as of April 6, 2020, all essential proceedings across New York State are now being handled by the New York courts virtually, with judges, attorneys, and most nonjudicial staff participating in those proceedings remotely.  Additionally, Chief Judge DiFiore and Chief Administrative Judge Marks announced their preliminary plans for handling non-essential matters, which are as follows:

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    Gov. Cuomo Tolls Procedural Laws Including Statutes of Limitations

    On March 20, 2020, in order to limit court operations in light of the evolving COVID-19 emergency, Governor Cuomo issued Executive Order 202.8.   That order, among other things, tolls through April 19, 2020 “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state[.]”  This order means that parties who are facing a deadline to file a civil action have an extension up and until April 19, 2020 in order to do so, unless a further extension of this deadline is granted.

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    Failure to State the “Obvious” Does Not Give Rise to a Securities Violation

    Commercial Division Justice Andrew Borrok recently issued a decision in Lonny Matlick et al. v. AmTrust Financial Services, Inc., addressing the following question: 

    Can an issuer be held liable under the Securities and Exchange Act of 1933 for the failure to disclose the risk that certain securities could be delisted when the issuer never guaranteed the listing of such securities in the first instance? 

    The answer, as Justice Borrok explained, is no.

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    Commercial Division Holds that Imposition of Direct Liability on Directors Who Oversaw Fraudulent Conveyance Requires Piercing the Corporate Veil

    Do the directors who oversaw the fraudulent conveyance of a corporation’s assets face direct liability for it?  Not unless the entities were shams and the directors exerted total dominion and control, according to Commercial Division Justice Andrew Borrok’s recent decision in Acacia Investments, B.S.C.(c) v. West End Equity I, Ltd.  In Acacia, Justice Borrok allowed fraudulent conveyance claims to proceed against the entities involved in an alleged transfer of judgment-debtors’ assets to a new family of companies, but did not allow direct claims against the directors of the entities.  He held that Delaware law does not create a claim for director liability, and that there was no factual basis for piercing the entities’ corporate veils to hold the directors liable for the alleged fraud.

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    COVID-19’s Effect on New York Commercial Division

    Over the last few days, Judge Lawrence K. Marks, the Chief Administrative Judge of the New York State Unified Court System, issued two memoranda bearing on COVID-19’s effect on the Commercial Division.

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    Second Department Affirms Decision Declaring Invalid an Assignment of an LLC Interest

    In Behrend v. New Windsor Group, LLC, the Second Department affirmed the denial of Plaintiff Julius Behrend’s (“Behrend”) motion for summary judgment in his action seeking a declaratory judgment that he held a membership interest in defendant New Windsor Group, LLC (“New Windsor”) or an interest in New Windsor’s assets.[1]  The Court’s decision affirmed a ruling by former Queens County Commercial Division Justice Martin E. Ritholtz. The opinion addressed the effect of a putative assignment of interest in New Windsor from Joseph Klein (“Klein”) to Behrend pursuant to a memorandum of understanding between them.  Behrend failed to seek consent to the assignment from New Windsor’s managing member, Andrew Perkal (“Perkal”), as was required by New Windsor’s operating agreement.

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    Commercial Division Holds that Representatives of a Deceased Limited Partner’s Estate Do Not Have Standing to Maintain a Derivative Lawsuit

    A recent Commercial Division decision demonstrates the ability of partnership agreement provisions to limit the executors of the plaintiff-limited-partner from continuing a derivative lawsuit after that partner’s death.  In Weinstein v. RAS Prop. Mgmt. LLC, 2020 NY Slip Op 30311(U) (Sup. Ct., N.Y. Cnty. Feb.5, 2020), Justice Andrew Borrok denied a motion to substitute a deceased plaintiff with the plaintiff’s executors  The court reasoned that the plaintiff’s executors lacked standing under the applicable partnership agreement.

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    Second Department Applies De Facto Merger Doctrine and Veil Piercing in Recent Appeal

    On January 29, 2020, the Second Department affirmed a Suffolk County Commercial Division decision applying both the de facto merger doctrine and the veil piercing doctrine.  Each doctrine often plays an important role in determining whether plaintiffs in business disputes can recover from certain entities and their owners who are not signatories to operative agreements.  The Second Department’s analysis in reviewing a decision by Justice Elizabeth Hazlitt Emerson of the Commercial Division provides a helpful review of these concepts.

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    Commercial Division Opinion Suggests that Subcontractor Can Potentially Recover From General Contractor and Property Owner for Work Outside Scope of Subcontract

    Suppose a property owner hires a general contractor for a time-sensitive project.  The general contractor in turn hires a subcontractor.  After the project hits some snags and delays, the property owner tries to move things along by assuring the subcontractor that it will get paid for certain additional tasks that the owner requests.  However, the subcontractor never enters into a formal written agreement covering the additional work.  If the subcontractor is not fully paid for the work, can it successfully sue the property owner, the general contractor, or both for contractual or quasi-contractual damages?  A recent decision by Justice Andrea Masley of the Commercial Division in Corporate Electrical Technologies, Inc. v. Structure Tone, Inc., suggests that in certain circumstances, the answer is yes: the subcontractor can recover from the property owner or the general contractor for the additional work, even absent a written contract covering that work, based on the parties’ course of conduct.

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    First Department Holds Source Code to Be a Trade Secret and Defines Bounds of Judicial Proceedings Privilege

    On November 12, 2019, in BEC Capital, LLC et al. v. Bistrovic et al., 177 A.D.3d 438 (1st Dep’t 2019), the Appellate Division, the First Department issued a decision reversing an order of the Commercial Division and holding that the Defendants’ source code is a trade secret, and therefore should have been ordered to be produced under an “attorneys and expert eyes only” form of review.  The First Department also held that an email produced prior to the litigation was not subject to privilege from defamation and thus could support Defendants’ counter-claim for defamation.

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    Seventh Judicial District Assigns New Justice

    Justice Craig Doran, the Administrative Judge of the Seventh Judicial District, assigned Justice J. Scott Odorisi to the Commercial Division.  Justice Odorisi replaces Justice Matthew Rosenbaum.  Justice Odorisi was elected to the New York State Supreme Court in 2013 and worked in private practice before going on the bench.

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    New York Amends Its Fraudulent Conveyance Law by Enacting the Uniform Voidable Transactions Act

    Last month, New York enacted the Uniform Voidable Transactions Act (“UVTA”), which seeks to modernize the state’s fraudulent conveyance law. 

    Since its introduction by the Uniform Law Commission in 2014, the UVTA has now been adopted by 21 states.  The UVTA was originally drafted by the Uniform Law Commission as an amendment to the 1984 Uniform Fraudulent Transfer Act (“UFTA”); New York was one of only seven states that did not adopt the original UFTA.

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    Commercial Division Advisory Council Proposes Requiring Briefs to Include Hyperlinks to NYSCEF Docket Entries

    The Administrative Board of the Courts is seeking public comment on a proposal by the Commercial Division Advisory Council to amend Commercial Division Rule 6 to (i) require legal memoranda to include hyperlinks to cited documents that have already been filed on NYSCEF and (ii) give judges discretion to require that citations include hyperlinks to legal databases such as LexisNexis, Westlaw, or government websites. 

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    Patterson Belknap Publishes an Updated, Second Edition of the New York Commercial Division Practice Guide

    Patterson Belknap Webb & Tyler LLP is pleased to announce the publication of the second edition of its New York Commercial Division Practice Guide.  As with the first edition, the guide is organized into various chapters drafted by Patterson Belknap lawyers.  Each chapter contains useful information about litigating in the Commercial Division of the New York State Supreme Court, and an excerpt is available to download here.

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    Commercial Division Applies Noerr-Pennington Doctrine to Dismiss Claim for Unlawful Retaliation

    In Pozner v. Fox Broadcasting Co., Justice Saliann Scarpulla of the Commercial Division dismissed plaintiff Cliff Pozner’s (“Pozner”) retaliation claim, which alleged that counterclaims filed against him by defendant Fox Broadcasting Company’s (“Fox”) constituted unlawful retaliation in violation of the New York Executive Law and the New York City Administrative Code.  The Court’s decision addressed an issue of first impression in New York: i.e., whether the Noerr-Pennington doctrine—which holds “‘that parties may not be subjected to liability for petitioning the government’ such as by filing litigation”—may be applied in the context of unlawful retaliation claims.

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    Commercial Division Declines to Stay Securities Case in Deference to Later-Filed Federal Action

    In Matter of GreenSky, Inc. Sec. Litig., Justice Jennifer G. Schecter of the Commercial Division denied defendants’ motion to stay the state court action pending resolution of a later-filed, federal action involving virtually identical claims made under the Securities Act of 1933 (“1933 Act”).   Justice Schecter did grant defendants’ alternative request for a stay of discovery pending the court’s decision on their motion to dismiss.  The court’s decision addressed: 1) whether state courts should stay 1933 Act cases in deference to federal cases involving similar claims; and 2) whether the Private Securities Litigation Reform Act of 1995 (the “Reform Act”) requires a stay of discovery in state court pending the court’s decision on a motion to dismiss.

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    Commercial Division Allows Successor Liability Claims to Proceed on “Mere Continuation” Theory

    A corporation that acquires the assets of another is generally not liable for the pre-existing liabilities of the acquired corporation.  However, as the Commercial Division’s recent decision in 47 East 34th Street (NY), L.P. v. BridgeStreet Worldwide, Inc. demonstrates, there is an exception to this rule when the successor is deemed to be a mere continuation of the acquired corporation.  In 47 East 34th Street, Justice Andrew Borrok relied on the mere continuation doctrine to deny a motion to dismiss claims asserted against a successor guarantor to a lease that had acquired the assets of the original guarantor through a consensual foreclosure.

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    Commercial Division Closes Door to Derivative Claims on Behalf of Cancelled LLC

    The Commercial Division recently ruled, in a case captioned as Hopkins v. Ackerman, that derivative claims on behalf of an LLC need to be brought before the LLC ceases to exist.  In Hopkins, Justice Saliann Scarpulla granted a motion to dismiss several derivative claims involving now-cancelled Delaware LLCs because, under Delaware law, a cancelled LLC does not have the ability to bring legal claims.  The Court also rejected the plaintiffs’ efforts to cast most of the claims as direct claims on behalf of a specific member in the LLCs.

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    Commercial Division Holds That Russian Law Restrictions on Document Discovery Do Not Absolve Russian Party From Responsibility to Produce Documents

    The Commercial Division regularly hears suits involving foreign parties, in part because contract parties, anywhere in the world, can choose to have a dispute heard by the Commercial Division as long as the transaction at issue concerns $1 million or more. However, the Commercial Division’s rules sometimes provide for more extensive discovery than would be allowed in a foreign party’s home country.  And in some instances, the Commercial Division’s rules may even provide for discovery that would be illegal in the foreign party’s home country.  Justice Andrew Borrok’s recent decision in Starr Russia Investments III B.V. v. Deloitte Touche Tohmatsu Ltd. provides an illustration of how the Commercial Division may navigate this thorny issue.

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    Commercial Division Rules that Arbitration Awardee Lacked Standing to Enforce Award Based on Collection Procedures Agreed to in the Underlying Contract

    Arbitration is a creature of contract and, as such, enforcing an arbitral award requires strict adherence to the procedures set forth in the relevant agreements.  This is true even where those procedures might preclude a party to the arbitration from taking steps to enforce its own award. In Zachariou v. Manios, Justice Andrea Masley of the Commercial Division dismissed an awardee’s enforcement action for lack of standing on the ground that the relevant arbitration agreement conferred exclusive authority over collecting and enforcing party distributions to a third-party trustee—and not to the plaintiff.

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    New York’s Chief Judge Announces Proposal to Restructure State Court System

    New York’s Chief Judge Janet DiFiore issued a press release on September 25, 2019 announcing proposed amendments to the New York State Constitution that would streamline and simplify the State’s Unified Court System.  The Chief Judge’s proposal calls for the elimination of “New York’s complex maze of 11 separate trial courts” and would “replace it with a simplified three-level structure to make the courts easier to navigate, increase operational efficiency and reduce costs to litigants, among other potential benefits.”  If successful, these structural changes would represent the first major Constitutional changes to court system organizations since reforms were passed over 40 years ago in 1977. These changes are also likely to affect the Commercial Division parts because, if adopted, they have the potential of increasing the overall efficiency of the state court system and the way judges are appointed to the Appellate Division.  These reforms, in turn, would likely help shape the development of commercial law in the State.

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    Commercial Division Declines to Certify Class and Approve Settlement in Xerox-Fuji Case

    There has been a new development in the Xerox and Fujifilm (“Fuji”) litigation:  Justice Ostrager of the New York Commercial Division declined to (i) certify the putative class, (ii) approve the proposed class settlement, and (iii) award the class attorney’s fees pursuant to a memorandum of understanding that was reached by defendant Xerox and putative class plaintiffs.  The material terms of this agreement—changes to the Xerox Board of Directors—already took effect prior to the Justice Ostrager ruling.

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    Advisory Council Proposes a Series of Commercial Division Rule Changes

    The final month of summer has seen a flurry of rulemaking activity with the Commercial Division Advisory Council (the “Advisory Council”) proposing four changes to the Commercial Division Rules. The Office of Court Administration has requested public comment on each proposal, and we will provide an update if any of the proposed amendments are adopted.

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    Commercial Division Dismisses Shareholder Derivative Suit Because General News Reports and Articles Were Insufficient to Plead Demand Futility with Particularity

    Before filing a shareholder derivative suit, the plaintiff must typically serve a pre-litigation demand upon the company’s Board of Directors, except in narrow circumstances where the demand may be futile.  In Gammel v. Immelt, Justice Andrea Masley of the New York Commercial Division dismissed the shareholder derivative suit because the plaintiff did not meet the pre-litigation demand requirement and failed to plead with particularity the circumstances establishing the futility exception.

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    Bronx County Commercial Division Begins its Inaugural Term on September 3, 2019

    At her annual State of the Judiciary speech held on February 26, 2019 at Bronx County Supreme Court, Chief Judge Janet DiFiore announced that the Commercial Division will be expanding to Bronx County, effective April 1, 2019.  On August 4, 2019, the Bronx County Supreme Court designated the Honorable Eddie McShan, who is a Supreme Court Justice from Bronx County, as the Commercial Division Justice presiding over the newly-created Part 32 beginning September 3, 2019.  The Honorable Kenneth L. Thompson will handle the Alternative Dispute Resolution (“ADR”) component.

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    Commercial Division Prevents End-Run Around Rule Precluding Judicial Dissolution of Foreign Business Entities

    In Matter of Raharney Capital, LLC v. Capital Stack LLC, the First Department held that New York courts lack subject matter jurisdiction over foreign company dissolution proceedings. Now, a recent Commercial Division decision rendered by Justice Saliann Scarpulla, Rosania v. Gluck, has clarified that the Raharney rule also applies to litigants’ attempts to obtain equitable relief associated with a judicial dissolution of a foreign business.

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    First Department Confirms Award of Attorney’s Fees, But Vacates Damages Award for Counterclaim as Non-Arbitrable

    On July 2, 2019, the First Department, in a unanimous decision written by Justice Dianne T. Renwick, reversed a decision of former Commercial Division Justice Eileen Bransten confirming an arbitration award.  The First Department concluded that the arbitrator’s award of attorney’s fees was not in manifest disregard of New York law, but that the arbitrator did not have jurisdiction over counterclaims brought by a related-third-party pursuant to an agreement that did not contain an arbitration clause.   The opinion provides a helpful review of New York law regarding both the award of attorney’s fees in arbitration and on jurisdictional objections to arbitration.

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