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Defendant Company’s Failure to Keep Current Address On File With Secretary of State Was Not an Adequate Excuse for Default

The Second Department determined that the failure of defendant limited liability company to maintain its current address with the Secretary of State precluded defendant from successfully opposing the motion to enter a default judgment (based upon defendant’s failure to answer:)

To successfully oppose a motion for leave to enter a default judgment based on the failure to appear or timely serve an answer, a defendant must demonstrate a reasonable excuse for its default and the existence of a potentially meritorious defense (see CPLR 5015[a][1]…). The defendant contended that it maintained an old address on file with the Secretary of State, and denied receipt of copies of the summons and complaint. However, the defendant’s unexplained failure to keep the Secretary of State apprised of its current address over a significant period of time did not constitute a reasonable excuse … .

Furthermore, the defendant was not entitled to vacatur of its default pursuant to CPLR 317. The defendant failed to rebut the plaintiff’s evidence that, for a period of more than five years, the defendant failed to file, with the Secretary of State, the required biennial form that would have apprised the Secretary of State of its current address (see Limited Liability Company Law § 301[e]). Under these circumstances, the defendants’ failure to personally receive copies of the summons and complaint was a result of a deliberate attempt to avoid notice of actions commenced against it… . Cruz v Keter Residence LLC, 2014 NY Slip Op 01575, 2nd Dept 3-12-14

 

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Youthful Offender Privilege Explained/Privilege Not Waived By Denial of the Act Which Was the Subject of the Youthful Offender Adjudication in Subsequent Civil Suit

The Second Department determined the defendant’s son did not waive the privilege associated with his youthful offender status. Although defendant’s son had pled guilty to an assault based upon his throwing an egg, he denied throwing the egg in his deposition during the related civil proceedings.  That denial did not waive the privilege and the plaintiff could not gain access to the records of the criminal proceedings:

The youthful offender statute (CPL article 720) provides special measures for persons found to be youthful offenders, which ” emanate from a legislative desire not to stigmatize youths between the ages of 16 and 19 with criminal records triggered by hasty or thoughtless acts which, although crimes, may not have been the serious deeds of hardened criminals'” … . Thus, “[a] youthful offender adjudication is not a judgment of conviction for a crime or any other offense” (CPL 720.35[1]). Further, pursuant to CPL 720.35(2), all official records and papers concerning the adjudication are sealed. * * *

The privilege created by this statute attaches not only to the physical documents constituting the official record, but also to the information contained within those documents … . Thus, a person adjudicated a youthful offender may refuse to answer questions regarding the charges and police investigation, whether he or she pleaded guilty, and whether a youthful offender adjudication was made. However, the person must still answer questions regarding the facts underlying the adjudication … . * * *

Here, the defendant’s son did not waive the privilege afforded by the statute since he did not commence an action which places the conduct at issue … . The defendant did not assert counterclaims or cross claims in this action placing the conduct at issue …, and the defendant’s son did not testify as to the confidential contents of the records … . Contrary to the plaintiff’s contention, the testimony of the defendant’s son at his deposition denying that he threw the egg which allegedly struck the plaintiff’s daughter did not waive the protections of the statute … . Castiglione v James FQ, 2014 NY Slip Op 01571, 2nd Dept 3-12-14

 

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Inexperience or Lack of Sophistication Does Not Toll the Statute of Limitations Re: the Discovery of Fraud/The Test for When the Fraud Should Have Been Discovered in an Objective One

The First Department determined the action alleging the fraudulent churning of trades by an employee of Morgan Stanley was untimely.  The plaintiff argued that plaintiff’s inexperience and lack of sophistication should toll the statute of limitations re: the discovery of the fraud.  The court explained that when the fraud should have been noticed is determined by an objective test:

“The test as to when fraud should with reasonable diligence have been discovered is an objective one,” and the duty of inquiry arises “where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he [or she] has been defrauded” … . Apt v Morgan Stanley DW Inc, 2014 NY Slip Op 01541, 1st Dept 3-11-14

 

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Language in the Arbitration Agreement Supported the Applicability of the New York Law Reserving the Determination of a Statute of Limitations Defense to the Court, Even Though the Controlling Federal Arbitration Act Presumptively Reserves the Determination of a Statute of Limitations Defense to the Arbitrator

The First Department determined that an arbitration agreement which specifically incorporates “the arbitration laws of New York State” incorporates the New York rule that the resolution of a statute of limitations defense is for the court, not the arbitrator, even where the matter is controlled by the Federal Arbitration Act [FAA] (which presumptively reserves resolution of a statute of limitations defense to the arbitrator):

Under the FAA, the “resolution of a statute of limitations defense is presumptively reserved to the arbitrator, not a court” … . “[A]n exception to this rule exists where parties explicitly agree to leave timeliness issues to the court” (Matter of Diamond Waterproofing Sys., Inc. v 55 Liberty Owners Corp., 4 NY3d 247, 253 [2005]). This is in keeping with the FAA policy by which private arbitration agreements are to be enforced according to their terms (id. at 252). Unlike the FAA, New York law “allows a threshold issue of timeliness to be asserted in court” even absent an agreement to do so (…CPLR 7502 [b]; 7503 [a]).

The arbitration clause of the agreement before us provides that “the arbitration laws of New York State” shall govern the parties’ arbitration. In Matter of Smith Barney, Harris Upham & Co. v Luckie (85 NY2d 193 [1995]…), the Court held that a choice of law provision which states that New York law shall govern both “the agreement and its enforcement” incorporated New York’s rule that threshold statute of limitations questions are for the courts (id. at 202). In Diamond Waterproofing, the Court held that an agreement that merely provided that it “shall be governed by the law of [New York]” did not express an intent to have New York law govern enforcement (4 NY3d at 253). The Court reasoned that “[i]n the absence of more critical Language concerning enforcement . . . all controversies, including issues of timeliness, are subjects for arbitration” (id.).

The question arises as to whether the specific incorporation of “the arbitration laws of New York State” in the instant arbitration clause itself constitutes the needed “more critical language concerning enforcement” within the contemplation of Diamond Waterproofing. We hold that it does and, under the agreement, the arbitration laws of New York State include article 75 of the CPLR.  Matter of ROM Reins Mgt Co Inc v Continental Ins Co Inc, 2014 NY Slip Op 01546, 1st Dept 3-11-14

 

Failure to Make Timely Motion to Dismiss Based Upon Improper Service Constituted a Waiver of the Jurisdictional Defense

The Third Department determined defendant’s (O’Neill’s) jurisdictional defense based on improper service was waived by the failure to move for judgment on that ground within 60 days:

Plaintiff did not effectuate proper substituted service on O’Neill because she failed to mail a copy of the pleadings to O’Neill after the process server left a copy with the president of Hafner Valuation at O’Neill’s place of business (see CPLR 308 [2]). Despite the error in service and defendants having raised it in their answer,O’Neill waived his objection on this ground by failing to move for judgment on that basis within 60 days of serving the answer (see CPLR 3211 [e]…).  Sutton v Hafner Valuation Group Inc, 516779, 3rd Dept 3-6-14

 

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Delay In Retaining Expert Did Not Warrant Preclusion of Expert’s Testimony

The Second Department determined Supreme Court should not have precluded plaintiff’s expert from testifying based upon the timing of the retaining of the expert and the serving of his expert information.  There was no evidence the delay was intentional or willful,  and no showing of prejudice to the opposing party:

CPLR 3101(d)(1)(i) “does not require a party to respond to a demand for expert witness information at any specific time nor does it mandate that a party be precluded from proffering expert testimony merely because of noncompliance with the statute,’ unless there is evidence of intentional or willful failure to disclose and a showing of prejudice by the opposing party” … . Here, the record does not support a conclusion that the plaintiff’s delay in retaining his expert or in serving his expert information was intentional or willful. Furthermore, any potential prejudice to the defendants was ameliorated by a two-month adjournment of the retrial agreed to by the parties … . Accordingly, the Supreme Court improvidently exercised its discretion in granting the defendants’ motion to preclude the plaintiff’s expert from testifying at the retrial … . Burbige v Siben & Ferber, 2014 NY Slip Op 01426, 2nd Dept 3-5-14

 

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New York Court Properly Declined to Exercise Jurisdiction Over Child Custody and Visitation Matters Due to Child’s Substantial Contacts with California

The Second Department determined Supreme Court had properly found that California, rather than New York, was the appropriate forum for determining child custody and visitation matters:

A court of this State which has jurisdiction under the Uniform Child Custody Jurisdiction and Enforcement Act (Domestic Relations Law art 5-A) may decline to exercise jurisdiction if it finds that New York is an inconvenient forum and that a court of another state is a more appropriate forum (see Domestic Relations Law § 76-f[1]…). The factors to be considered in making this determination include the length of time the subject child has resided outside the state, any agreement between the parties as to which state should assume jurisdiction, the nature and location of the evidence required to resolve the pending litigation, the ability of the court of each state to decide the issue expeditiously and the procedures necessary to present the evidence, and the familiarity of the court of each state with the facts and issues in the pending litigation (see Domestic Relations Law § 76-f[2]…). “Particularly relevant to the jurisdictional determination is whether the forum in which the litigation is to proceed has optimum access to relevant evidence” … . “Maximum rather than minimum contacts with the State are required” … . Greenfield v Greenfield, 2014 NY Slip Op 01434, 2nd Dept 3-5-14

 

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Delay In Retaining Expert Did Not Warrant Preclusion of Expert’s Testimony

The Second Department determined Supreme Court should not have precluded plaintiff’s expert from testifying based upon the timing of the retaining of the expert and the serving of his expert information.  There was no evidence the delay was intentional or willful,  and no showing of prejudice to the opposing party:

CPLR 3101(d)(1)(i) “does not require a party to respond to a demand for expert witness information at any specific time nor does it mandate that a party be precluded from proffering expert testimony merely because of noncompliance with the statute,’ unless there is evidence of intentional or willful failure to disclose and a showing of prejudice by the opposing party” … . Here, the record does not support a conclusion that the plaintiff’s delay in retaining his expert or in serving his expert information was intentional or willful. Furthermore, any potential prejudice to the defendants was ameliorated by a two-month adjournment of the retrial agreed to by the parties … . Accordingly, the Supreme Court improvidently exercised its discretion in granting the defendants’ motion to preclude the plaintiff’s expert from testifying at the retrial … . Burbige v Siben & Ferber, 2014 NY Slip Op 01426, 2nd Dept 3-5-14

 

Court Has Common-Law “Interest of Justice” Authority to Modify Its Own Order and/or a Stipulation Entered Into During Litigation

In affirming Supreme Court’s modifying its own order in the interest of justice, the Third Department explained the common law power to do so.  The order concerned the terms of a stipulation entered into during litigation:

A court has the common-law authority to, in its discretion, grant relief from a judgment or order in the interest of justice, considering “‘the facts of the particular case, the equities affecting each party and others affected by the judgment or order, and the grounds for the requested relief'” … . Even if the stipulation had not merged into an order of the court, the court has the “discretionary power to relieve parties from the consequences of a stipulation effected during litigation” … . Here, Supreme Court correctly noted that it had the authority to modify its own order. Hodge v Development at Helderberg Meadows LLC, 517046, 3rd Dept 2-27-14

 

Plaintiff Estopped from Bringing State Retaliation Claim/Issue Decided by District Court Which Dismissed Plaintiff’s Federal Title VII Constructive Discharge Claim

In a full-fledged opinion by Justice Acosta, the First Department determined plaintiff was estopped from bringing her retaliation action in state court because the issue raised had necessarily been determined when the District Court dismissed her federal complaint. The plaintiff alleged she was retaliated against after she told management about allegedly discriminatory practices. The retaliation was alleged to have been the failure to act quickly to address a dispute with a coworker:

The doctrine of collateral estoppel applies where “[f]irst, the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the issue . . . had a full and fair opportunity to contest the prior determination” … . “The party seeking the benefit of collateral estoppel has the burden of demonstrating the identity of the issues in the present litigation and the prior determination, whereas the party attempting to defeat its application has the burden of establishing the absence of a full and fair opportunity to litigate the issue in the prior action” (id. at 456).In considering plaintiff’s Title VII constructive discharge claim, the District Court examined, as it was obliged to do, the question of whether defendant “intentionally subjected her to an intolerable work environment”… . An integral part …of the court’s determination that defendant had not done so was its explicit finding that defendant “responded promptly after [p]laintiff’s complaint” and “the next day … attempted to address [p]laintiff’s concerns within the constraints of [defendant’s] staffing situation”… . Simmons-Grant v Quinn Emanuel Urquhart & Sullivan LLP, 2014 NY Slip Op 01407, 1st Dept 2-27-14

 

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