Category: NY Practice

In our recent article What Rejected Renren Settlement Means for Investor Suits, we analyzed Justice Andrew Borrok’s decision rejecting a proposed $300 million settlement between Renren, Inc. (“Renren”) and minority shareholders in In re: Renren Inc. Derivative Litigation.[i] The article noted certain unresolved issues following Justice Borrok’s rejection of the settlement, including two issues that have been raised in recent rulings or filings: (1) the proper record date to be used to determine the minority shareholders who are entitled to potential recoveries, and (2) whether a prejudgment attachment order imposing restrictions on defendants’ transfer or sale of assets in an amount up to $560 million will remain in place. 

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). 

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.

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[.]”

On Monday, just days after Justice Peter Sherwood and Justice Marcy Friedman announced their upcoming retirements from the bench, the Chief Administrative Judge announced the news that Justice Robert Reed—currently a New York Supreme Court Justice—will start receiving Commercial Division cases in the next few weeks. 

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.

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.

Last summer, we discussed a decision by the Court of Appeals that upheld the use in commercial leases of waivers of declaratory relief.  In response to that decision, the New York Legislature enacted Real Property Law Section 235-h, which now voids waivers of declaratory relief in commercial leases as against public policy.

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. 

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.

A party seeking to enforce a judgment against an asset of a judgment debtor that is held by a third party may petition for a turnover order through a special proceeding provided for by CPLR Article 52.  Justice Saliann Scarpulla’s recent decision in The Wimbledon Fund, SPC (Class TT) v. Weston Capital Partners Master Fund II, LTD (Wimbledon) illustrates several of the potential issues that may arise during such a proceeding.

Can a debtor obtain declaratory judgment shielding himself from liability to a creditor’s officers or associates personally and then use that judgment to preclude subsequent claims by the creditor itself?  Not in the First Department, following the recent decision in Avilon Automotive Group v. Leontiev.[i]  In Avilon, a unanimous panel reversed the res judicata-based dismissal of fraudulent transfer and other related claims arising from several Russian loan transactions because the claims by the creditors themselves were not the subject of a prior declaratory judgment concerning the debtor’s liability to the creditors’ representative.Avilon_Auto._Grp._v._Leontiev.pdf

In an opinion in Liberty Petroleum Realty, LLC v. Gulf Oil, L.P., dated August 2, 2018, the Appellate Division, First Department reversed the Supreme Court’s protective order prohibiting the deposition of an attorney in a commercial case.[i]

On July 2, 2018, Justice Barry R. Ostrager of the Commercial Division denied a motion to dismiss by UMG Recordings, Inc. (“Universal”), an alter ego theory of liability against it in Aspire Music Group, LLC v. Cash Money Records, Inc., concluding that Aspire sufficiently alleged that Universal was the equitable owner of Cash Money to survive the pre-answer motion to dismiss.

On Wednesday, June 20, 2018, Patterson Belknap Webb & Tyler LLP welcomed Associate Judge Michael Garcia of the New York Court of Appeals, and Professor Patrick M. Connors, author of the New York Practice treatise, for a continuing legal education program on litigation practice in New York courts. Patterson Belknap partners Stephen P. Younger and Muhammad U. Faridi, authors of the New York Commercial Division Practice Guide, also participated with Mr. Younger moderating a discussion of New York practice issues and Mr. Faridi serving as a panelist.

In a new, practical, on-demand CLE webcast from our partner Bloomberg BNA, Commercial Division Blog authors Stephen P. Younger, Muhammad U. Faridi, and Benjamin F. Jackson provide in-house counsel and litigators in private practice with advice on how to litigate...

On February 8, 2018, Justice Shirley Werner Kornreich of the Commercial Division rejected a disclosure-only class action settlement in City Trading Fund v. Nye, 2018 BL 44689 (Sup. Ct. Feb. 08, 2018).  The settlement provided for additional disclosures to shareholders in a proxy statement plus $500,000 in attorneys’ fees and expenses for plaintiffs’ counsel.  As discussed below, the Commercial Division’s rejection of this disclosure-only settlement is one of the first applications of the First Department’s new standard for reviewing such settlements of merger challenge litigations. 

The Westchester County Commercial Division has launched a new state-of-the-art courtroom at the White Plains Courthouse.  The Integrated Courtroom Technology (ICT) part is outfitted with high-tech features designed to ease the handling of complex commercial cases and enhance the presentation of evidence.

Patterson Belknap Webb & Tyler LLP announced on November 20, 2017, the publication of its New York Commercial Division Practice Guide.  This new publication is part of Bloomberg Law's Litigation Practice Portfolio Series, and an excerpt is available to download at: http://on.bna.com/H1KM30gCY7v.  The guide is organized into various chapters drafted by Patterson Belknap lawyers, containing useful information about litigating in the Commercial Division of the New York State Supreme Court.

On August 25, 2017, Justice Shirley Werner Kornreich of the New York Commercial Division entered an order reprimanding a high-profile lawyer, Mark Geragos, for misconduct during a deposition, including refusing to answer questions in violation of the court’s explicit instructions.  Gottwald v. Sebert, No. 653118/2014, 2017 BL 303419 (N.Y. Sup. Ct. Aug. 25, 2017).

In Fidilio v. Hoosick Falls Productions, Inc., No. 654066/2016, 2017 BL 107640 (Sup. Ct. Mar. 22, 2017), Justice Eileen Bransten of the New York County Commercial Division granted a motion to compel arbitration of a dispute relating to a short-lived reality TV show, Scrappers.  Justice Bransten ruled that the arbitration clause in one agreement between Frank Fidilio, the show's creator, and Hoosick Falls Production, Inc. ("Hoosick"), the production company, required arbitration of Fidilio's claims against Hoosick brought under another agreement which was executed at the same time, by the same parties, governing the same subject matter.  Fidilio's remaining claims for breach of contract as a third-party beneficiary, unjust enrichment, and an accounting against Viacom International Inc. and the show's distributor, New 38th Floor Productions, Inc. ("New 38th"), were dismissed for failure to state a claim.  Fidilio provides important lessons for parties considering mandatory arbitration clauses in connection with transactions involving multiple agreements, as well as for litigants considering whether claims may be subject to mandatory arbitration under provisions of related agreements.

In the past, a foreign bank’s use of correspondent bank accounts in the United States to facilitate wire transfers has not necessarily given New York courts a sufficient basis for jurisdiction over the bank.  But a recent 4-3 Court of Appeals decision may change that.  In Rushaid, et al. v. Pictet & Cie, et al., No. 180, 2016 BL 387923 (N.Y. Nov. 22, 2016), Judge Rivera writing for the four person majority (and overturning decisions of both the First Department and the Commercial Division) ruled that a foreign bank’s “repeated, deliberate” use of correspondent bank accounts in the United States is enough to establish New York jurisdiction.

On October 27, 2016, Chief Judge Janet DiFiore delivered a much awaited opinion in Justinian Capital SPC v. WestLB.[1]  Judge Leslie Stein wrote a dissenting opinion, which was joined by Judge Eugene Pigott, Jr.  Justinian involves the issue of champerty, which, as the Court describes, is “the purchase of notes, securities, or other instruments or claims with the intent and for the primary purpose of bringing a lawsuit.”[2]  Under New York law, champerty is prohibited.[3]  However, the New York champerty statute provides for a safe-harbor when the purchased asset has an “aggregate purchase price of at least five hundred thousand dollars.”[4]  Justinian clarifies that this safe harbor only applies when either the party pays “the purchase price or [has] a binding and bona fide obligation to pay the purchase price.”[5]  Put simply, at least $500,000 of the transaction must not be contingent on the litigation in order to fall within the safe harbor.

On October 11, 2016, in Matter of Skoler, 2016 BL 348290 (Sup. Ct. N.Y. Cnty.), Justice Lawrence K. Marks of the Commercial Division issued a decision regarding the strictures of judicial dissolution pursuant to Section 1104(a) of the New York Business Corporation Law (“BCL”).  Petitioners sought judicial dissolution of County Group Inc. (“County Group”), a small, closely held New York domestic corporation.  Petitioners hold 50% of the issued stock in County Group, and the “Responding Shareholders,” who opposed judicial dissolution, hold the remaining 50%.  The Responding Shareholders cross-moved to dismiss the petition.