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Criteria for Intervention as of Right and Permission to Intervene Explained (Not Met Here)

The Third Department determined a fund, which was entitled to reimbursement from any damages awarded plaintiff in a pending medical malpractice action, did not have the right to intervene and was properly denied permission to intervene in the medical malpractice action.  The court explained the relevant analytical criteria:

As relevant here, any person may intervene as of right “when the representation of the person’s interest by the parties is or may be inadequate and the person is or may be bound by the judgment” (CPLR 1012 [a] [2]). The Fund would be bound by any judgment because plaintiff has sought to recover medical costs, as well as other damages, in his complaints in these actions. Despite the Fund’s argument, however, it appears that plaintiff is and will adequately represent the Fund’s interests. At oral argument, the Fund acknowledged that plaintiff’s counsel is competent and will act in good faith. Plaintiff has an incentive to maximize his recovery, considering that he will not receive anything personally if he obtains a settlement or verdict of $537,273.12 or less. Plaintiff is also contractually bound to protect the Fund’s right to subrogation and has agreed to a lien on any recovery … . Supreme Court correctly found that plaintiff is adequately representing the Fund’s interests, and any argument that plaintiff may not do so in the future is pure speculation … .

A court may permit intervention, in its discretion, when the person’s claim has a common question of law or fact with the main action, but “the court shall consider whether the intervention will unduly delay the determination of the action or prejudice the substantial rights of any party” (CPLR 1013). Although the Fund’s asserted claim has common questions of law and fact with plaintiff’s claims, intervention was properly denied. Intervention would cause some delay because it would lead to duplicative discovery and motion practice, as the Fund and plaintiff could each separately seek demands and relief from the multiple defendants … . This could also cause some prejudice to defendants, who would be required to respond to similar repetitive demands and motions, as well as the possibility of the Fund calling additional witnesses or even experts at trial. The Court of Appeals has even acknowledged that allowing a provider of medical benefit payments to intervene could create tension between the injured party and his or her insurer,… and “inevitably complicates settlement negotiations” … . Mavente v Albany Med. Ctr. Hosp., 2015 NY Slip Op 01849, 3rd Dept 3-5-15

 

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Court Should Not Have Summarily Determined Declaratory Judgment Action In Absence of a Request to Do So/The Mootness Doctrine Precluded Court Rulings on an Expired Contract/The Open Meetings Law Was Violated by the Town

The Third Department determined Supreme Court should not have summarily considered the declaratory judgment aspect of this hybrid action without a request to do so and without converting the proceeding to a summary judgment action.  The Third Department further determined the mootness doctrine precluded the Supreme Court from ruling on the provisions of an expired contract, and the town had violated the Open Meetings Law by holding closed sessions.  The action concerned the use of property for motorcycle events. Local property owners brought the action alleging that the events violated the allowed use of the land:

It is well settled that a court’s jurisdiction extends only to live controversies” …, and a matter becomes moot “unless the rights of the parties will be directly affected by the determination of the [claim] and the interest of the parties is an immediate consequence of the judgment” … . Where, as here, the passage of time or “a change in circumstances prevents a court from rendering a decision that would effectively determine an actual controversy,” the claim must be dismissed … . The 2013 agreement, by its own terms, pertained solely to Safety Track’s land uses and events that occurred during the 2013 track season and expired at the end of that year, thereby rendering the challenges to the 2013 agreement moot … . Further, we do not agree with Supreme Court’s finding that the exception to the mootness doctrine was satisfied… . …

In a hybrid proceeding and action, separate procedural rules apply to those causes of action which are asserted pursuant to CPLR article 78, on the one hand, and those which seek declaratory relief, on the other hand” … . In the absence of a formalized motion requesting the “summary determination of the causes of action which seek . . . declaratory relief, it is error for [a court] to summarily dispose of those causes of action” … .

It is undisputed that there was no pending motion for summary disposition of the declaratory judgment action when Supreme Court rendered its 2014 judgment. Nor did the court provide notice to the parties that it was considering the summary disposition of the declaratory judgment action, such that the parties would be afforded an opportunity to further develop the evidentiary record and offer competent proof supportive of their respective positions … .

… Generally, “[e]very meeting of a public body shall be open to the general public, except that an executive session of such body may be called and business transacted thereat in accordance with [Public Officers Law § 105]” (Public Officers Law § 103 [a]). While a governing body may enter into an executive session, it may do so only for certain purposes, including, as is relevant here, the consideration of an appointment or to engage in private discussions relating to proposed or pending litigation (see Public Officers Law § 105 [1] [f]…). However, the body must “identify the subject matter to be discussed . . . with some degree of particularity”… . * * * As the Town failed to demonstrate that it comported with the relevant statutory provisions when conducting the instant executive sessions, such sessions were violative of the Public Officers Law … . Matter of Ballard v New York Safety Track LLC. 2015 NY Slip Op 01845, 3rd Dept 3-5-15

 

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Trustee’s Settlement of Claims Against Countrywide/Bank of America Stemming from Sale of Mortgage-Backed Securities Approved

The First Department, in a full-fledged opinion by Justice Saxe, determined the trustee properly exercised its discretion in settling the claims stemming from mortgage-backed securities sold by Countrywide Home Loans between 2004 and 2008. Countywide was subsequently purchased by Bank of America (BofA). The First Department explained the courts’ powers re: reviewing the settlement under CPLR Article 77:

The ultimate issue for determination here is whether the trustee’s discretionary power was exercised reasonably and in good faith … . It is not the task of the court to decide whether we agree with the Trustee’s judgment; rather, our task is limited to ensuring that the trustee has not acted in bad faith such that his conduct constituted an abuse of discretion … .

We agree with Supreme Court that the Trustee did not abuse its discretion or act unreasonably or in bad faith in embarking on the settlement here. The Trustee acted within its authority throughout the process, and there is no indication that it was acting in self-interest or in the interests of BofA rather than those of the certificateholders.

Importantly, “if a trustee has selected trust counsel prudently and in good faith, and has relied on plausible advice on a matter within counsel’s expertise, the trustee’s conduct is significantly probative of prudence” (Restatement [Third] of Trusts § 77, Comment b[2]). While reliance on the advice of counsel may not always be the end of the analysis regarding a claimed breach of trust — it is possible for a trustee to specifically seek out legal advice that would support the trustee’s desired course of conduct, or there may be other circumstances establishing that it was unreasonable to follow the legal advice (id.) — a party challenging the decisions of a trustee who followed the advice of a highly-regarded specialist in the relevant area of law can prevail only upon a showing that, based on the particular circumstances, the reliance on such counsel’s assessment was unreasonable and in bad faith. Court approval of the settlement does not require that the court agree with counsel’s judgment or assessment; all that is required is a determination that it was reasonable for the Trustee to rely on counsel’s expert judgment. Matter of Bank of N.Y. Mellon, 2015 NY Slip Op 01880, 1st Dept 3-5-15

 

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Charitable Trust’s Challenge to Tax Foreclosure Time-Barred—Four-Month Statute of Limitations Applies to Action for Declaratory Judgment—RPTL, not the EPTL, Controls

The Third Department determined the action challenging the tax foreclosure on parcels of land owned by a charitable trust set up to hold land for Native Americans must be dismissed as time-barred.  The court further determined that County Court had subject matter jurisdiction because the matter was subject to the Real Property Tax Law (RPTL), not the Estates Powers and Trust Law (EPTL), and there was, therefore, no requirement that the Attorney General be notified of the tax foreclosure proceedings:

Under RPTL article 7, a property owner claiming to be aggrieved by an assessment of real property on the basis that the assessment is excessive, unequal or unlawful, or that the property is misclassified, may file a petition challenging the assessment, but “such a proceeding shall be commenced within thirty days after the final completion and filing of the assessment roll containing such assessment” (RPTL 702 [2]; see RPTL 704 [1]; 706 [1]). Where a party is alleging that the assessment is void — either through a challenge to the methodology of assessment or the jurisdiction of the taxing authority to assess particular property — the party may instead bring a proceeding pursuant to CPLR article 78 or a declaratory judgment action … . Both of those options are governed by a four-month statute of limitations … . The Court of Appeals has expressly rejected plaintiffs’ argument that, because the property is allegedly mandatorily exempt from taxes, the assessment is illegal and void and may be challenged at any time … . Plaintiffs concede that they had notice of the Town’s determination regarding the taxable status of the parcels, and filed a grievance to administratively challenge the tax bills when the property was first listed as not tax exempt, but they failed to appeal when the Town denied the grievance. Plaintiffs did not file any further grievances, actions or proceedings until they commenced this action more than a year after the final foreclosure proceeding was concluded. Accordingly, while an action for declaratory judgment was a proper method, the statute of limitations bars plaintiffs’ challenges to their tax assessments … . Turtle Is Trust v County of Clinton, 2015 NY Slip Op 01698, 3rd Dept 2-26-15

 

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Re: Breach of Fiduciary Duty and Fraud Causes of Action—Application of the “Repudiation Rule” and the “Discovery Rule” to the Statute of Limitations Explained

Plaintiff (a governmental agency charged with administering the workers’ compensation system) brought this action against workers’ compensation trusts alleging the trusts became insolvent because of defendants’ misconduct. Plaintiff alleged breach of fiduciary duty, fraud, breach of contract and sought common law indemnification. The bulk of the decision is devoted to determining the timeliness of the actions. The decision addressed the “repudiation rule” and the “discovery rule” in fraud actions, as well as many other issues not summarized here:

…[T]he repudiation rule, which provides that “the applicable statutory period . . . does not begin to run until the fiduciary has openly repudiated his or her obligation or the relationship has been otherwise terminated” … . The Court of Appeals has instructed that, under the repudiation rule, “the time starts running when a successor [fiduciary] is put in place” … . After the fiduciary “has yielded . . . to a successor, . . . [t]he running of the statute [of limitations] then begins, and only actual or intentional fraud will be effective to suspend it” … . * * * … [T]he repudiation rule acts as a toll of the limitations period for all misconduct committed by the fiduciary prior to repudiation of its obligation or termination of the relationship. In other words, all of the alleged misconduct prior to the severance date is included in the actionable portion of the claim. * * *

…[A] portion of plaintiff’s breach of fiduciary duty claim is grounded in its allegations that the … defendants breached their fiduciary duties to the trusts by fraudulently concealing or misrepresenting the financial condition of the trusts, the danger of operating deficits and issues associated with underwriting deficiencies, and that [defendants] did so as part of a scheme to increase membership and thereby increase its own commissions. These are fraud allegations, and they are essential to this portion of the fiduciary duty claim. That is, the relevant portion of the claim is “based on fraud” and “there would be no injury but for the fraud” … . As such, that portion of the fiduciary duty claim is subject to a six-year limitations period … . * * *

The “discovery rule” is found in CPLR 213 (8), which provides that claims based on fraud “must be commenced [within] the greater of six years from the date the cause of action accrued or two years from the time [a] plaintiff . . . discovered the fraud, or could with reasonable diligence have discovered it.” It is settled that “[t]he inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was possessed of knowledge of facts from which [the fraud] could be reasonably inferred” … . New York State Workers’ Compensation Bd v Consolidated Risk Servs Inc, 2015 NY Slip Op 01699, 3rd Dept 2-26-15

 

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Four-Month Statute of Limitations for Challenging Department of Environmental Conservation’s (DEC’s) and Town’s Ruling on Proper Remedial Measures for a Hazardous Waste Site Was Restarted When a Different Factual Presentation Was Invited

The Second Department reversed Supreme Court and determined that a recent reconsideration of the proper remedial measures for a hazardous waste site on petitioner’s property restarted the four-month statute of limitations for challenging the Department of Environmental Conservation’s (DEC’s)/Town’s ruling, even though the conclusion reached after reconsideration was the same as was reached in 1995:

“[A] proceeding against a body or officer must be commenced within four months after the determination to be reviewed becomes final and binding upon the petitioner (CPLR 217[1]). An administrative determination becomes final and binding’ when (1) the administrative agency reached a definitive position on the issue that inflicts actual, concrete injury; and (2) the injury inflicted may not be significantly ameliorated by further administrative action or by steps available to the complaining party'” … .

In general, a request for discretionary reconsideration does not serve to extend the statute of limitations or render an otherwise final determination nonfinal … . This is because “[a] motion to reconsider generally seeks the same relief, and advances factual and legal issues that were previously litigated at the administrative level” … .

However, where “the agency conducts a fresh and complete examination of the matter based on newly presented evidence,” an aggrieved party may seek review in a CPLR article 78 proceeding commenced within four months of the new determination … .

Here, a different factual presentation was invited … by the DEC, and conducted by the Town. Matter of Riverso v New York State Dept of Envtl Conservation, 2015 NY Slip Op 01644, 2nd Dept 2-25-15

 

Motion for Discontinuance Without Prejudice Should Not Have Been Granted Because It Allowed Movant to Escape Potentially Adverse Determinations

The Second Department determined Supreme Court should not have granted plaintiffs’ motion for a discontinuance without prejudice, a motion made in response to defendant’s (Parkway’s) motion to dismiss for failure to respond to Parkway’s 90-day notice:

“A motion for leave to discontinue an action without prejudice should be granted unless there are reasons which would justify its denial” … . Such a determination “rests within the sound discretion of the court,” and the motion should be granted “[i]n the absence of special circumstances, such as prejudice to a substantial right of the defendant, or other improper consequences” …, including an adverse determination of the court …, or the consequences of a potentially adverse determination … .

Here, the plaintiffs cross-moved, inter alia, for leave to discontinue the action without prejudice in response to Parkway’s separate motion pursuant to CPLR 3216 to dismiss the complaint on the ground that the plaintiffs had failed to timely respond to its 90-day notice. The Supreme Court’s determination to grant that branch of the plaintiffs’ cross motion which was for leave to discontinue the action without prejudice allowed the plaintiffs to avoid the potentially adverse consequences of having failed to timely respond to Parkway’s 90-day notice (see CPLR 3216), and an adverse determination of Parkway’s motion for summary judgment. Baez v Parkway Mobile Homes Inc, 2015 NY Slip Op 01596, 2nd Dept 2-25-15

 

Plaintiff Need Not Submit Any Evidence In Response to a Motion to Dismiss Alleging Failure to State a Cause of Action, Even If Defendant Does

The Second Department explained how a motion to dismiss for failure to state a cause of action (CPLR 3211(a)(7)) should be handled when evidence is submitted in support of the motion.  The court noted that the plaintiff need not submit any evidence and can stand on the pleadings alone:

“A court is, of course, permitted to consider evidentiary material submitted by a defendant in support of a motion to dismiss pursuant to CPLR 3211 (a) (7)” … . “If the court considers evidentiary material, the criterion then becomes whether the proponent of the pleading has a cause of action, not whether he has stated one'” … . “Yet, affidavits submitted by a defendant will almost never warrant dismissal under CPLR 3211 unless they establish conclusively that the plaintiff has no cause of action” … . The plaintiff “may not be penalized for failure to make an evidentiary showing in support of a complaint that states a claim on its face” … . The plaintiff may stand on his or her pleading alone to state all the necessary elements of a cognizable cause of action, and, unless the motion to dismiss is converted by the court to a motion for summary judgment, the plaintiff will not be penalized because he or she has not made an evidentiary showing in support of the complaint … . In light of these standards, it is clear that the defendant’s motion should have been denied. The complaint stated a cause of action, and the defendant’s submissions did not “conclusively establish that the plaintiff has no cause of action” … . Clarke v Laidlaw Tr Inc, 2015 NY Slip Op 01602, 2nd Dept 2-25-15

 

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Lack of Standing Defense Waived If Not Raised In Answer or Pre-Answer Motion to Dismiss—Lack of Standing Is Not a Jurisdictional Defect–Sua Sponte Dismissal on that Ground Improper

The Second Department reversed Supreme Court’s sua sponte dismissal of a complaint seeking foreclosure and sale on the ground plaintiff lacked standing.  The defendants did not answer the complaint or make a pre-answer motion to dismiss, so the lack of standing defense was waived:

A court’s power to dismiss a complaint, sua sponte, is to be used sparingly and only when extraordinary circumstances exist to warrant dismissal … . Here, the Supreme Court was not presented with extraordinary circumstances warranting the sua sponte dismissal of the complaint and cancellation of the notice of pendency. Since the defendants did not answer the complaint, and did not make a pre-answer motion to dismiss the complaint, they waived the defense of lack of standing … . Furthermore, a party’s lack of standing does not constitute a jurisdictional defect and does not warrant a sua sponte dismissal of the complaint by the court … . HSBC Bank USA NA v Simmons, 2015 NY Slip Op 01609, 2nd Dept 2-25-15

 

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Four-Month Statute of Limitations for Challenging Termination of a Firefighter Runs from the Effective Date of Termination, Not the Date of Notification

The Second Department noted that the four-month statute of limitations for challenging the termination of a probationary firefighter ran from the effective date of the termination, not the date of notification of the termination:

“[A] proceeding against a body or officer must be commenced within four months after the determination to be reviewed becomes final and binding upon the petitioner” (CPLR 217[1]). Where, as here, a governmental employee is not entitled to a hearing in connection with his or her discharge, the limitations period for commencing a CPLR article 78 proceeding to challenge that discharge “runs from the notice of discharge or the effective date of discharge, if later” … .

Here, although the petitioner was notified of the termination of his probationary employment by letter dated September 13, 2013, and was told not to report for further shifts, the notice set the effective termination date of the petitioner’s probationary employment as September 23, 2013. Accordingly, … the statute of limitations began to run on September 23, 2013. Matter of Bruno v Greenville Fire Dist, 2015 NY Slip Op 01630, 2nd Dept 2-25-15

 

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