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.

Commercial Division Permanently Stays International Arbitration

Earlier this year, in In re New York State Dept. of Health (Rusi Tech. Co., Ltd.),[1] Albany County Commercial Division Justice Richard Platkin issued a decision to permanently stay the arbitration before the China International Economic and Trade Arbitration Commission ("CIETAC") brought by a Chinese company (“Rusi”) against the New York State Department of Health (“DOH”) regarding a purchase contract for KN-95 masks. This decision, which harkens back to the chaotic early days of the pandemic,  provides a good reminder for practitioners regarding the “meeting of the minds” requirement of a contract.


[1] No. 907022/2021 (Sup. Ct. Albany Cty. Jan. 25, 2022).

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Commercial Division Force Majeure Decision Provides A Good Overview of the Law Surrounding Leases and the COVID-19 Pandemic

A few months ago, a Commercial Division court granted summary judgment in favor of the plaintiff-landlord in a case involving a commercial lease for a gym that was closed due to COVID-19 restrictions.  The decision in Amherst II UE LLC v. Fitness Int’l, LLC, No. 806643/2021, 2021 NY Slip Op 51289(U) (Sup. Ct. Erie Cty. Dec. 8, 2021)—with extensive citations to recent cases—ultimately rejected the Defendant’s force majeure arguments and provides a good overview of the legal issues that have come up with commercial leases during the COVID-19 pandemic.

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Commercial Division Holds Oral Modification to Written Agreement Unenforceable Under New York’s Statute of Frauds

A recent ruling in the Suffolk County Commercial Division highlights the risk a party faces when agreeing to, and later attempting to, enforce an oral modification to a written contract.  In Castle Restoration LLC v. Castle Restoration & Construction, Inc.,[1] Commercial Division Justice Elizabeth Emerson determined that New York’s statute of frauds rendered an oral modification unenforceable and, ultimately, left the enforcing party with no remedy in its commercial dispute.

 

[1] 159 N.Y.S.3d 829 (Sup. Ct., Suffolk Cty. Feb. 9, 2022).

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Court Strikes Defendant’s Jury Demand Where Defendant Asserted Equitable Defense of Rescission

In Real Estate Webmasters Inc. v. Rodeo Realty, Inc., Justice Richard Platkin of the Albany County Commercial Division granted plaintiff’s motion to strike Rodeo’s jury demand in connection with Real Estate Webmasters Inc.’s (“REW”) complaint against Rodeo for anticipatory breach of contract.[i]  The Court held that Rodeo waived its right to a jury trial by interposing an equitable defense of rescission and related counterclaim for fraudulent inducement arising from the same transaction underlying REW’s complaint. 


[i] Real Estate Webmasters Inc. v. Rodeo Realty, Inc., 74 Misc. 3d 1204(A) (N.Y. Sup. Ct. Jan. 24, 2022).

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Court Considers Emails and Letters as “Documentary Evidence” in Dismissing Legal Malpractice Complaint Pursuant to CPLR 3211(a)(1) and (a)(7)

Citing “substantial documentary evidence” consisting of emails and letters, Justice Borrok of Manhattan’s Commercial Division concluded that a legal malpractice claim brought by former president of Universal Music Group’s (“UMG’s”) Republic Records, Charlie Walk was based on a “false narrative” and consequently dismissed the complaint pursuant to CPLR 3211(a)(1) and (a)(7). 

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New York State Unified Court System Adopts New Rules and Guidelines For E-Discovery

On April 11, 2022, the New York State Unified Court System will adopt additional rules and guidelines for Electronically Stored Information (“ESI”).  As we explained in our earlier post on these changes, “[t]he goal of the revisions is to address e-discovery in a more consolidated way, modify the rules for clarity and consistency, expand the rules to address important ESI topics consistent with the CPLR and caselaw.”

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Commercial Division Reiterates Broad Scope of ERISA Preemption and Difficulty of Pleading Breach of Fiduciary Duty and Conversion Claims Alongside Breach of Contract Claims

The Commercial Division’s decision in Rockmore v. Plastic Surgery Associates, LLP[i] demonstrates the broad scope of ERISA preemption and the difficulty of pleading breach of fiduciary duty and conversion claims alongside breach of contract claims.  In Rockmore, Albany County Supreme Court Justice Richard M. Platkin dismissed several claims brought by the departing member of a partnership of physicians.  The core claims—which concerned the funding of the partnership’s defined benefit plan—were preempted by ERISA.  Separately, Justice Platkin also dismissed breach of fiduciary duty and conversion claims as duplicative of a claim alleging a breach of the operative Partnership Agreement.


[i] Rockmore v. Plastic Surgery Assocs., LLP, 2020 BL 478175, 69 Misc. 3d 1222(A), 135 N.Y.S.3d 259 (Sup. Ct. Albany Cnty. Dec. 2, 2020).

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Chief Judge DiFiore Proposes “Long Overdue” Overhaul of New York’s Trial Court Structure

New York’s maze-like trial court system includes 11 separate trial courts, the most in the country.  As New York practitioners are well aware, a single dispute may require a litigant to file related claims in multiple courts, resulting in redundant court appearances, duplicative briefs, and unnecessary costs to attorneys and their clients.  Critics of New York’s centuries-old system have long advocated for reform.  As we explained in a previous post, Chief Judge Janet DiFiore first announced a proposal to streamline the State’s trial court structure in September 2019.  Although that initial call for reform did not gain immediate traction in the legislature, on March 3, 2022, Chief Judge DiFiore announced a renewed proposal “to achieve long-overdue reform and simplification of the State’s overly complicated court structure.”[i] 


[i] Press Release, “Chief Judge DiFiore, Senate and Assembly Judiciary Chairs Hoylman and Lavine Announce Introduction of Constitutional Amendment for Court Reform and Simplification” (March 3, 2022), https://www.nycourts.gov/LegacyPDFS/press/pdfs/PR22_03.pdf).

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Commercial Division Bench Trial Demonstrates Importance of Witness Preparation

Justice Borrok of Manhattan’s Commercial Division presided over a bench trial between a contractor and a sub-contractor concerning payments connected to work on New York City Housing Authority’s (NYCHA) Harlem River Houses.[i]   The sub-contractor, Citi Building Renovation (Citi), brought an action claiming monies due on the amended sub-contract signed with the contractor, Neelam Construction Corp. (Neelam).  At trial, Citi asserted three causes of actionbreach of contract; promissory estoppel; and unjust enrichmentclaiming damages of $426,688 plus interest. 


[i] Citi Bldg. Renovation, Inc. v. Neelam Constr. Corp., 70 Misc.3d 1204(A) (Sup. Ct., NY Cnty., Dec. 9, 2020).

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Commercial Division Finds Work Performed by Subcontractor in New York Insufficient To Establish Personal Jurisdiction Over Prime Contractor Outside of New York

In December 2020, the Suffolk County Supreme Court decided a novel question of personal jurisdiction law in Black Diamond Aviation Group LLC v. Spirit Avionics, Ltd.[i]  Justice James Hudson determined that personal jurisdiction was not established when the contractor defendant released an aircraft for transport to a New York airport in order for its subcontractor to perform necessary upgrade and maintenance work there.  In so holding, the Court provided a helpful recitation of the type of contacts necessary to establish personal jurisdiction under New York’s long-arm statute and the Due Process clause.


[i] 70 Misc. 3d 823, 137 N.Y.S.3d 890 (Sup. Ct. 2020).

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Recent Commercial Division Decision Provides a Primer to the Myriad of Potential Issues Associated with Collecting A Judgment Against Alleged Foreign Alter-Egos

On November 10, 2021, a Commercial Division Court issued a decision on a motion to dismiss the claims brought by Wilmington Trust Company (“WTC”) against a wide range of parties that WTC alleged to be alter egos of an insolvent entity. This decision, in Cortlandt St. Recovery Corp. v. Bonderman, No. 653357/2011, Doc. No. 757 (Sup. Ct. N.Y. Cty. Nov. 10, 2021), provides a good introduction into the variety of issues that can arise when a party brings claims against alleged foreign alter egos.

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New Commercial Division Rule Expanding the Scope of Mandatory Settlement Conferences Is Now in Effect

Update:  As un update to our earlier post on the amendment of Commercial Division Rule 30 to expand the scope of mandatory settlement conferences—the new amendment is now in effect.  As of February 1, 2022, absent an exemption, “the parties in every case pending in the Commercial Division must participate in a court-ordered mandatory settlement conference (MSC) following the filing of a Note of Issue.”  Under the new provision, parties must submit a request seeking assignment to one of the following four tracks for an MSC, and all parties must send a representative with knowledge of the case and authority to settle it to the court-ordered MSC once it has been assigned to one of these tracks:

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First Judicial District Assigns All Securities Act of 1933 Matters to Hon. Andrew Borrok

On December 30, 2021, Administrative Judge Deborah A. Kaplan of the First Judicial District announced that, for judicial economy, any pending actions or future actions commenced pursuant to The Securities Act of 1933 (15 U.S.C. § 77a et seq) shall be assigned to the Hon. Andrew Borrok of the New York County Commercial Division.  These types of cases, by their nature, are typically assigned to the Commercial Division when filed in state court.  Although similar consolidation orders have been issued in the Commercial Division in the past—for example, all new residential-mortgage-backed-securities cases were consolidated in Part 60 for a period of time—this appears to be the first time that all cases involving a particular statute have been consolidated before a single Commercial Division justice.  In order to effectuate the consolidation, when e-filing a new Securities Act of 1933 matter, practitioners should select “Securities Act of 1933” as the case type from the “Other Commercial” drop-down menu.  For pending Securities Act of 1933 cases, practitioners should e-file for Judicial Intervention.  When prompted with the question “Will the ‘Nature of the Action’ stay as . . .”, “No” should be selected and the case action type should be updated to “Securities Act of 1933.” 

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New York Courts Resume In-Person Operations

In an earlier post, we reported that beginning January 2022 all oral arguments in the First and Second Departments would be conducted virtually out of concern for the health and safety of the public and court employees. As the number of new COVID-19 cases has since decreased, both courts have announced that in-person oral arguments will resume on Monday, February 28, 2022.[1] After this change, the courts will not grant requests for remote arguments—all appeals will be argued in person or submitted without argument.


[1] https://www.nycourts.gov/courts/ad1/PDFs/AD1-2.0January2022Updatefinal.pdf; https://www.nycourts.gov/
courts/ad2/RESUME_IN-PERSON_ORAL_ARGUMENTS.shtml.

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Commercial Division Promulgates New Rule Regarding Mandatory Settlement Conferences

On January 7, 2022, the Commercial Division amended Rule 30 of section 202.70(g) of the Rules of the Commercial Division of the Supreme Court.  Rule 30 is entitled “Settlement and Pretrial Conferences,” and the amendment is effective as of February 1, 2022.  The amendment adds a new provision to Rule 30 that provides for mandatory settlement conferences in Commercial Division cases following the filing of a Note of Issue. 

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New York Courts Return to Virtual Operations Amid Omicron Surge

As the number of new COVID-19 cases reached record levels, the First and Second Departments announced that beginning January 2022, and until further notice, oral arguments will be conducted virtually. The return to remote proceedings marks the latest challenge practitioners and parties have faced during the COVID-19 pandemic. Proceedings in both courts will continue to be livestreamed over the internet. In a joint statement, the Presiding Justices of the First and Second Departments, Rolando Acosta and Hector LaSalle, expressed hope that both courts “will be able to safely recommence in-person proceedings in February.”[1] Until then, the Justices committed to “closely monitor the trends regarding the virus and stand ready to swiftly adapt as needed to protect the public.”[2]


[1] https://nycourts.gov/courts/ad1/PDFs/Final%20-%20Press%20Release%20-%20AD1%20and%20AD2%
20virtual%20arguments%20Jan%202022%20(002).pdf

[2] Id.

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Commercial Division Promulgates New Rule Regarding Remote Depositions

Following up on the recent addition of a new rule governing virtual evidentiary hearings and trials (https://www.pbwt.com/ny-commercial-division-blog/new-commercial-division-rule-on-virtual-evidentiary-hearings-and-trials/), last week, the Commercial Division promulgated Rule 37 of section 202.70(g) of the Rules of the Commercial Division of the Supreme Court.  Rule 37 is entitled “Remote Depositions,” and it is effective as of December 15, 2021.  Along with Rule 37, the Commercial Division also added Appendix G as a form protocol for parties to use for remote depositions.

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First Department Announces Pilot Program for Interlocutory Appeals Relating Exclusively to Discovery Matters

Recently, the First Department announced a new pilot program for interlocutory appeals from the Commercial Division related to discovery matters.[1]  Beginning on January 1, 2022, the perfection period for interlocutory appeals of discovery disputes will be shortened from six months to four months.  The goal of the program is to “promptly resolve issues involving discovery disputes that should be addressed before a litigation can proceed.” 


[1] Interlocutory Appeals from the Commercial Division of the Supreme Court Relating to Discovery Matters, N.Y. St. Unified Ct. Sys., https://www.nycourts.gov/courts/ad1/PDFs/Pilot%20Program-CommercialInterlocutoryAppealsDiscovery.pdf

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No Joint Venture for Sandy Subcontractors

A recent decision in the Suffolk County Commercial Division clarifies the requirements for establishing a joint venture and provides litigants with a clear example of a potential pleading pitfall with respect to claims relating to joint ventures.

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Recent Westchester County Commercial Division Decision Demonstrates the High Bar Required for Obtaining Mandatory Injunctive Relief

In Costello v. Molloy, Justice Gretchen Walsh of the Westchester County Commercial Division denied Plaintiff William Costello’s request for a mandatory injunction against Defendants Ronald Molloy and Curis Partners, LLC reinstating Costello as a member of the LLC.  Although the Court found that Costello demonstrated a likelihood of success on the merits of his claim that his LLC membership was wrongfully terminated, the Court held he failed to clearly establish the type of extraordinary circumstances necessary to warrant the granting of mandatory injunctive relief reinstating his membership in Curis.

 

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The Importance of Proper Notice in Defending Against Yellowstone Injunctions

In Ronald Benderson 1995 Trust v. Erie County Medical Center Corporation, Justice Walker of the Erie County Commercial Division granted Plaintiff’s request for a Yellowstone injunction where the defendant landlord provided a faulty notice of default to the plaintiff tenant.  This decision highlights the importance of proper notice in order to successfully defend against a Yellowstone injunction.

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Commercial Division Dismisses Claims Alleging Monopoly Control Over Waste Services Market in Capital Region

In Cty. Waste & Recycling Serv., Inc. v. Twin Bridges Waste & Recycling, LLC, Justice Platkin of the Albany County Commercial Division Court considered plaintiffs’ (County Waste and Recycling Service, Inc. (“County Waste”),  Robert Wright Disposal, Inc.(“Wright Disposal”), and third-party defendants Waste Connections, Inc. and Waste Connections US, Inc. (“Waste Connections”)), joint motion under CPLR 3211(a)(7) and (8) to dismiss the Amended Counterclaims and Third-Party Complaint (“ACTC”) of defendant Twin Bridges Waste and Recycling, LLC (“Twin Bridges”).  Justice Platkin’s opinion touches on various issues concerning anti-competitive behavior in New York State, as well as personal jurisdiction.

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New York State Unified Court System Issue Request for Comment On New Commercial Division ESI Rules

On September 7, 2021, the New York State Unified Court System published a request for comment on proposed additional rules and guidelines for Electronically Stored Information (“ESI”).  According to the proposal, “[t]he goal of the revisions is to address e-discovery in a more consolidated way, modify the rules for clarity and consistency, expand the rules to address important ESI topics consistent with the CPLR and caselaw, and to provide further detail in Appendix A – Proposed ESI Guidelines than is practical in the Commercial Division Rules.”

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Commercial Division Decision Suggests Insurers May Struggle to Enforce Anti-Assignment Clauses in Prior-Incurred Loss Cases

In Certain Underwriters at Lloyd’s v. AT&T Corp.,[1] Justice Cohen of the New York County Commercial Division Court granted a motion for partial summary judgment and determined that Nokia, through its predecessor Lucent, had the right by assignment to seek coverage under certain insurance policies issued to AT&T that contained anti-assignment clauses.  Although the general rule in New York is that such anti-assignment clauses are enforceable, this decision highlights how it can be more challenging to bar assignment in the special context of an insurance policy.

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Recent Commercial Division Decision Provides a Refresher on Common Statutes of Limitation Issues

Recently, in F.W. Sims, Inc. v. Simonelli, Index No. 022942/2014, Doc. No. 412 (Sup. Ct., Suffolk Cnty., May 7, 2021), the Commercial Division Court denied a motion to dismiss on statute of limitation as well as full faith and credit grounds.  This decision provides a good refresher on common limitations period issues that arise in commercial cases and is also an example of the impact, or lack thereof, of a settlement in a related matter.

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Defendant’s Unsuccessful About-Face Results in $5 Million Judgment

Litigants arguing that their adversary should be judicially estopped from pursing a particular position in litigation face a relatively high burden to invoke the doctrine successfully.  Two recent decisions from Justice Borrok help illustrate the specific circumstances under which courts are most likely to estop a litigation pursuant to this doctrine.

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CDAC Rule Proposal to Loosen Requirements To Become A Neutral Evaluator Still Pending

On December 4, 2020, the Administrative Board of the Courts sought public comment on the Commercial Division Advisory Council’s (“CDAC”) proposed amendment to Commercial Division Rule 3(a), 22 NYCRR § 202.70(g). The current language of Rule 3 permits the court to direct, or for counsel to seek, the appointment of an uncompensated mediator for the purpose of mediating a resolution of all or some issues presented in the litigation  The CDAC’s Rule 3(a) proposal would “permit the use of neutral evaluation as an [alternative dispute resolution (“ADR”)] mechanism and to allow for the inclusion of neutral evaluators in rosters of court-approved neutrals.”  Currently, under Part 146 of the Rules of the Chief Administrative Judge, “neutral evaluation” is “a confidential, non-binding process in which a neutral third party (the neutral evaluator) with expertise in the subject matter relating to the dispute provides an assessment of likely court outcomes of a case or an issue in an effort to help parties reach a settlement.”  The Chief Administrative Judge’s rules already set forth the training prerequisites to become a neutral evaluator.

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Commercial Division Rules Expanded to General Civil Practice in New York Effective February 1, 2021

Administrative Order 270/2020—which adopts certain Commercial Division Rules into the Uniform Civil Rules for the Supreme Court in New York—went into effect on February 1, 2021.  In signing this order, Chief Judge Marks described the Commercial Division as “an efficient, sophisticated, up-to-date court, dealing with challenging commercial cases” that “has had as its primary goal the cost-effective, predictable and fair adjudication of complex commercial cases[.]”  Further, he acknowledged the Commercial Division’s role in dealing with the “unique problems of commercial practice,” and praised its “function[] as an incubator, becoming a recognized leader in court system innovation, and demonstrating an unparalleled creativity and flexibility in development of rules and practices[.]”

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NY Lenders May Face Barriers In Real Estate Dispositions

As the country entered into an extended period of lockdowns this spring, there was widespread concern that the anticipated severe economic impact of the pandemic would lead to a wave of defaults and foreclosures in the commercial real estate market.
 

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