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SUBPOENA ISSUED BY THE ATTORNEY GENERAL OF THE US VIRGIN ISLANDS SHOULD HAVE BEEN QUASHED BECAUSE IT WAS ISSUED WITHOUT ANY INVOLVEMENT BY A STATE COURT (FIRST DEPT).

The First Department, reversing Supreme Court, determined a subpoena issued by the Attorney General of the United State Virgin Islands (USVI) should have been quashed for failure to comply with CPLR 3119:

The subpoena … failed to meet the procedural requirements for out-of-state subpoenas because it was not issued “under authority of a court of record” (see generally CPLR 3119[a][1], [4] … ). Although the subpoena need not have been issued in connection with a pending litigation, there must have been some court involvement, such as the issuance of a commission by a state court clerk or signature of the subpoena by a state court judge … . We reject respondents’ argument that administrative subpoenas are outside the scope of CPLR 3119 and not subject to any restrictions on issuance. Matter of American Express Co. v United States Virgin Is. Dept. of Justice, 2019 NY Slip Op 08618, First Dept 12-3-19

 

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DEFICIENCIES IN THE BANK’S PROOF OF DEFAULT, STANDING AND THE AMOUNT OWED COULD NOT BE CURED BY SUBMITTING ADDITIONAL PROOF IN THE REPLY PAPERS IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not submit sufficient proof of defendants’ default, standing or the amount owed, and the deficiencies could not be cured by a second affidavit submitted in reply:

… [T]he plaintiff submitted the affidavit of its assistant vice president, Keith Weinkauf. As to the defendants’ alleged default, Weinkauf stated that the defendants “fail[ed] to make the full payment due on the [m]aturity [d]ate” of the note. On the issue of standing, Weinkauf averred that “[e]ffective March 31, 2016, Montauk Credit Union merged into Bethpage Federal Credit Union.” Further, with respect to the amount owed by the defendants, Weinkauf stated that the current unpaid principal balance due on the note was $58,165.61, plus interest, late charges, and fees. However, apart from producing a copy of the note itself, Weinkauf submitted no evidence in admissible form with his affidavit to establish the existence of a default, the plaintiff’s standing, or the calculation of the unpaid amount owed by the defendants … . Although the plaintiff later submitted, with its reply papers, a second affidavit from Weinkauf, along with supporting documentary evidence, to establish its standing, the plaintiff could not, under the circumstances presented, rely on the second affidavit to correct deficiencies inherent in the original one … . Bethpage Fed. Credit Union v Luzzi, 2019 NY Slip Op 08550, Second Dept, 11-27-19

 

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THE ATTORNEY-CLIENT PRIVILEGE DID NOT PASS TO THE FOREIGN (DELAWARE) CORPORATION AFTER A MERGER AND ACQUISITION OF NEW YORK BUSINESS ENTITIES; THEREFORE THE NEW YORK PARTIES, IN THEIR CLAIMS AGAINST THE ATTORNEYS WHO REPRESENTED THEM IN THE TRANSACTION, CAN SEEK ACCESS TO THE ATTORNEYS’ PRIVILEGED COMMUNICATIONS CONCERNING THE TRANSACTION (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Austin, reversing Supreme Court, determined that New York law applied to a party’s assertion of  the attorney-client privilege for documents associated with a corporate acquisition and merger involving New York and Delaware business entities. The opinion is fact-based and far too complex and comprehensive to summarize here. The Second Department, disagreeing with Supreme Court, held that the choice of law was governed by public policy, and the proper theory for access to the privileged documents is New York’s law of replevin. In a nutshell, the Second Department held that the attorney-client privilege did not pass to the foreign corporation after the merger and acquisition, but rather remained with the the New York parties (Sina and Askari) and allowed the New York parties to pursue claims against the attorneys (McDermott)  who represented them in the transaction:

In a situation where documents are sought, New York will apply the law of the forum where the evidence will be introduced at trial or the location of the proceeding seeking discovery of those documents … . Here, the privileged communications being sought by the plaintiffs in this New York replevin action were made in New York between New York-based attorneys at McDermott and Sina, a New York corporation, involving its then-majority shareholder and president, Askari, a New York resident. The sole nexus that Delaware has to this action is that Specialty is a limited liability company formed under the laws of that state. Consequently, New York law applies in this action sounding in replevin seeking the disclosure of McDermott’s files … . …

It would indeed be incongruous to enforce a law which effectively forecloses New York corporations merging with foreign corporations from having the ability to pursue their claims against their counsel or the newly formed, post-merger entities based on the post-merger entities’ control of the documents needed by the former entities to prosecute potential claims. Here, Delaware law gives the new corporation, a putative defendant, sole access to and control of the merger-related documents by the exercise of the attorney-client privilege. This is contrary to New York public policy … . * * *

Here, Business Corporation Law § 1006 specifically provides that a dissolved corporation, like Sina, may commence an action in any court under its corporate name. Sina’s dissolution does not affect Sina’s right or capacity to maintain this replevin action since the claim arose from McDermott’s representation of Sina which began before Sina’s dissolution. … Thus, the plaintiffs demonstrated their prima facie entitlement to judgment as a matter of law in this action for replevin since the plaintiffs submitted evidence, through Askari’s affidavit, that McDermott represented Sina and Askari during the “transactions.” As a result, the plaintiffs demonstrated, prima facie, their superior possessory right to McDermott’s files. Askari v McDermott, Will & Emery, LLP, 2019 NY Slip Op 08547, Second Dept 11-27-19

 

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COURT SHOULD NOT HAVE CONSIDERED A NEW THEORY OF MEDICAL MALPRACTICE RAISED FOR THE FIRST TIME IN RESPONSE TO DEFENDANT’S MOTION FOR SUMMARY JUDGMENT (FIRST DEPT).

The First Department, reversing Supreme Court, determined the court should not have considered a new theory of medical malpractice raised for the first time in response to defendant’s motion for summary judgment:

… [T]he complaint and bill of particulars were only sufficient to put defendant on notice of an allegation that, in January 2013, he failed to properly compare the 2013 EC [echocardiagram] with the 2011 EC contained in decedent’s medical record, and determine that a dilation in decedent’s aorta had increased. Plaintiffs’ papers were insufficient to put defendant on notice of plaintiffs’ new theory of liability – raised for the first time in her expert’s opinion – that he deviated from the standard of care in August 2011, when interpreting the 2011 EC … . Here, where negligence is specifically alleged to have occurred only between December 2012 and January 2013, we conclude that the vague, ambiguous, nonspecific and open-ended assertion “prior or subsequent thereto” contained in plaintiffs’ bill of particulars failed to put defendant on notice of a claim that he acted negligently in August 2011. Carroll v New York City Health & Hosps. Corp., 2019 NY Slip Op 08524, First Dept 11-26-19

 

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FEDERAL BANKRUPTCY STAY TOLLED THE STATUTE OF LIMITATIONS IN A FORECLOSURE ACTION COMMENCED BEFORE THE STAY WENT INTO EFFECT (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over a three-judge dissent, determined an automatic bankruptcy stay tolls the statute of limitations where a party has a pending action at the time the stay was imposed:

New York law tolls the statute of limitations where “the commencement of an action has been stayed by a court or by statutory prohibition” (CPLR 204 [a]). Federal bankruptcy law automatically stays the commencement or continuation of any judicial proceedings against a debtor upon the filing of a bankruptcy petition (see 11 USC § 362 [a]). We must determine whether the bankruptcy stay qualifies as a “statutory prohibition” under CPLR 204 (a), and, if so, whether a party may later avail itself of the toll where, at the time the stay was imposed, that party had a pending action asserting the same claim. … [W]e answer yes to both questions … . * * *

CPLR 204 (a) provides, “[w]here the commencement of an action has been stayed by a court or by statutory prohibition, the duration of the stay is not a part of the time within which the action must be commenced.” The result here depends on our reading of the term “commencement.”

Plaintiff argues that it is impossible for defendant to have been prohibited from “commencing” an action because a foreclosure action had been commenced prior to plaintiff’s bankruptcy filing. Application of plaintiff’s rule would be as follows: Because defendant filed the first foreclosure claim and defendant responded by filing a bankruptcy petition, invoking the automatic stay, commencement of that first action was not “stayed” under the statute and the toll is inapplicable. And when defendant filed a second foreclosure action, and plaintiff again responded by again filing a bankruptcy petition that invoked the automatic stay, “commencement” of that second action was not stayed, once again making the toll inapplicable … . * * *

Neither this Court nor the Legislature has restricted the term “commencement” to the first time a party files a complaint asserting a cause of action; instead the term may also include the commencement of subsequent actions asserting the same claim … . Lubonty v U.S. Bank Natl. Assn.., 2019 NY Slip Op 08520, CtApp 11-25-19

 

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PLAINTIFF TRUSTEE’S RESIDENCE IS CALIFORNIA AND THE CAUSES OF ACTION IN THIS RESIDENTIAL-MORTGAGE-BACKED-SECURITIES BREACH OF CONTRACT ACTION THEREFORE ACCRUED IN CALIFORNIA; UNDER NEW YORK’S BORROWING STATUTE, CPLR 202, THE ACTIONS MUST BE DISMISSED BECAUSE THEY ARE UNTIMELY UNDER CALIFORNIA LAW (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Fahey, over a two-judge dissent, determined that California, the residence of the plaintiff, here a residential-mortgage-backed-securities trustee, was where the breach of contract action accrued, not New York. Therefore, pursuant to CPLR 202, New York’s borrowing statute, the action must be timely under both California and New York law. The action was not timely under California law which has a four-year statute for breach of contract:

Defendants argued that as a resident of California, plaintiff suffered economic injury in California, and therefore plaintiff’s causes of action accrued in California for the purposes of CPLR 202. Plaintiff conceded that it was a resident of California. It argued, however, that instead of applying the general rule that an economic injury is suffered where the plaintiff resides to determine where the cause of action accrued, the court should apply a multi-factor analysis. Plaintiff asserted that because it was suing in a representative capacity on behalf of the trusts, it did not suffer real economic loss, and its residence was irrelevant, or at least not the primary consideration, for determining the place of accrual. * * *

We reaffirm that “a cause of action accrues at the time and in the place of the injury” … . Although courts may, in appropriate cases, conclude that an economic loss was sustained in a place other than where the plaintiff resides, we decline to apply the multi-factor analysis that plaintiff proposes. * * *

… [W]e conclude that plaintiff’s residence applies to determine the place of injury in this case. As trustee, plaintiff is authorized to enforce, on behalf of the certificateholders, the representations and warranties in the relevant agreements. Accordingly, it is appropriate for us to look to plaintiff’s residence as the place where the economic injury was sustained and, consequently, where plaintiff’s causes of action accrued for purposes of CPLR 202. Deutsche Bank Natl. Trust Co. v Barclays Bank PLC, 2019 NY Slip Op 08519, Ct App 11-25-19

 

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FOUR CLASSES PROPERLY CERTIFIED TO BRING CLASS ACTION SUITS BASED UPON THE CONTAMINATION OF AIR, WATER, REAL PROPERTY AND PEOPLE WITH TOXIC CHEMICALS (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Lynch, determined that Supreme Court properly certified four classes bring class action suits against a manufacturer alleging the contamination of water, air, real property and people with toxic chemicals, PFOA and PFOS:

Plaintiffs, residents of the Town, commenced this action as a proposed class action, alleging that defendant’s use and improper disposal of PFOA and PFOS caused personal injury and property damage. In their complaint, plaintiffs proposed four classes: (1) a public water property damage class; (2) a private well water property damage class; (3) a private well nuisance class; and (4) a PFOA invasion injury class. Generally, the putative class members were individuals who owned or leased property in the Town or who ingested contaminated municipal or well water or inhaled PFOA or PFOS particulates in the Town and had demonstrable evidence of elevated levels of the chemical in their blood system. * * *

We agree with Supreme Court’s determination that, in addition to those questions common to the property classes, the answers to certain additional common questions will be applicable to all members of the invasion injury class, for example: (1) whether medical monitoring is an available remedy; (2) the extent of the health hazard presented by exposure to PFOA; and (3) whether the members of the class are at significant increased risk for disease based on the excess accumulation of PFOA in their bodies. Although defendant contends that there are myriad factual questions that are not common to the class, we do not agree that those predominate. Importantly, this is not a case where there is an issue of fact regarding exposure — rather, each class member must establish exposure and accumulation through blood work … . Burdick v Tonoga, Inc., 2019 NY Slip Op 08461, Third Dept 11-21-19

 

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NEW YORK DID NOT HAVE JURISDICTION OVER FATHER, A KENTUCKY RESIDENT, IN THIS DIVORCE ACTION: THE COUPLE HAD NOT LIVED TOGETHER IN NEW YORK STATE FOR 23 YEARS (THIRD DEPT).

The Third Department, reversing Supreme Court, determined New York did not have jurisdiction over father, a Kentucky resident, in this divorce action. The couple had last lived in New York in 1995 and had resided in Kentucky from 2003 to 2015:

Assuming, without deciding, that the wife established one of the predicates for jurisdiction under CPLR 302 (b), we find that the quality and nature of the husband’s activities in New York were such that it would be unreasonable and unfair to require him to defend an action in this state. Although the parties married in New York in 1991 and resided here until 1995, they have not resided together in this state in over 23 years. From 2003 until 2015, the parties resided together in Kentucky, where, at the time of commencement of this action, the husband was employed as a university professor and the parties owned real property. With the husband’s consent, the wife moved to New York with the parties’ son  in August 2015 and, as vaguely asserted by the wife, the husband has visited them in New York. The parties have not rented or purchased a home in New York. Rather, the wife and the son have lived rent-free with the wife’s parents, with the husband providing additional financial support. In our view, the husband’s contacts with New York are insufficient to warrant the exercise of personal jurisdiction over him … .Accordingly, Supreme Court should have granted the husband’s motion to dismiss the complaint for lack of personal jurisdiction. Crosby v Crosby, 2019 NY Slip Op 08469, Third Dept 11-21-19

 

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PUBLIC HEALTH LAW 230 DOES NOT CREATE A PRIVATE RIGHT OF ACTION FOR MALICIOUS REPORTING OF INSURANCE FRAUD BY A PHYSICIAN TO THE OFFICE OF PROFESSIONAL MEDICAL CONDUCT (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, determined that Public Health Law 230 (11) (b) does not create a private right of action. Plaintiff surgeon provided medical care to four patients injured in an automobile accident and submitted claims for payment to the defendant insurer. The insurer fully or partially denied the claims and then filed complaints against plaintiff with the Office of Professional Medical Conduct (OPMC) alleging insurance fraud. The OPMC declined to discipline plaintiff. Plaintiff then sued defendant insurer for bad-faith and malicious reporting in violation of Public Health Law 230 (11) (b). The Court of Appeals noted a split of authority in the 1st and 2nd Departments re: whether a violation of this statute give rise to a private right of action:

Public Health Law § 230 (11) (b) does not expressly create a cause of action authorizing licensees to commence civil litigation against a complainant that files an allegedly bad-faith and/or malicious report with OPMC (compare Public Health Law § 230 [10] [j] [creating an express right to commence a CPLR article 78 proceeding in certain instances]). Consequently, “recovery may be had . . . only if a legislative intent to create such a right of action is fairly implied in the statutory provision[] and [its] legislative history” … . …

We have consistently identified three “essential factors” to be considered in determining whether a private right of action can be fairly implied from the statutory text and legislative history: “(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme”… . Critically, all three factors must be satisfied before an implied private right of action will be recognized … . Applying these factors here, we conclude that the legislature did not intend to create a right of action under Public Health Law § 230 (11) (b). Haar v Nationwide Mut. Fire Ins. Co., 2019 NY Slip Op 08445, CtApp 11-21-19

 

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STATUTE OF LIMITATIONS TOLLED BY THE FILING OF SIMILAR ACTIONS ALLEGING THE UNDERPAYMENT OF WAGES TO HOME HEALTH AIDES (SECOND DEPT).

The Second Department determined defendants’ motion to dismiss these “wage-underpayment” actions as time-barred to the extent they seek damages for underpayment more than six years before the suits were brought was properly denied. The Second Department held that, pursuant to American Pipe & Constr. Co. v Utah, 414 US 538, the statute of limitations was tolled based upon the filing of prior similar actions:

The plaintiffs, home health aides who were employed by the defendants Americare Certified Special Services, Inc., and Americare, Inc. (hereinafter together Americare), and who often worked 24-hour “live in” shifts, seek to recover damages for underpayment of minimum, overtime, and “spread of hours” wages in violation of the Labor Law and New York State Department of Labor wage orders and regulations. * * *

We find that … applying American Pipe tolling under the circumstances, where a court has not previously addressed the impropriety of class certification, is consistent with the policies underlying the tolling doctrine: avoiding multiplicity of suits and vexatious litigation … . Accordingly, we agree with the Supreme Court’s denial of the defendants’ motion to dismiss … . Badzio v Americare Certified Special Servs., Inc., 2019 NY Slip Op 08389, Second Dept 11-20-19

 

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