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Law Office Failure Was Valid Excuse for Default—Answer Deemed Served in Absence of Cross Motion

The Second Department determined law office failure constituted a valid excuse for a defendant’s default and defendant’s answer, which was attached to the papers submitted in opposition to plaintiff’s motion for a default judgment, would be deemed served in the absence of a cross motion seeking leave to file a late answer:

In its discretion, the court may accept law office failure as an excuse (see CPLR 2005;… . The claim of law office failure should, however, be supported by a “detailed and credible” explanation of the default or defaults at issue … . Law office failure should not be excused where allegations of law office failure are conclusory and unsubstantiated…. The Supreme Court providently exercised its discretion in accepting the defendant’s excuse of law office failure, as the defendant provided detailed affidavits of personnel explaining the delay in timely serving an answer.  Blake v United States of Am, 2013 NY Slip 05609, 2nd Dept 8-14-13

 

Court Has No Power to Dismiss for Failure to Prosecute in Absence of 90-Demand to File and Serve Note of Issue

The Second Department noted that a court does not have the power to dismiss a complaint based on the doctrine of laches, or failure to prosecute, where plaintiff has not been served with a 90-day demand to serve and file a note of issue (CPLR 3216).  Baxter v Javier, 2013 NY slip Op 05605, 2nd Dept 8-14-13

 

Dismissal of Federal Action Precluded Related Action in State Court—Res Judicata, Privity under Res Judicata Doctrine, Effect of Initial Forum Choice, and “First-in-Time” Rule Discussed

In a full-fledged opinion by Justice Moskowitz, the First Department determined that Supreme Court should have dismissed the state complaint because the dismissal of the related federal complaint controlled under the doctrine of res judicata.  The lawsuit was brought by the insurer (Syncora) of mortgage-backed securities issued by the defendant (JP Morgan [formerly known as Bear Stearns]). Syncora first sued in federal court where the action was dismissed based on the findings that the fraud allegations Syncora sought to add to the complaint were untimely and Syncora did not have standing because it was neither a buyer or a seller of the relevant securities.  Syncora then filed the state action asserting the same claims rejected as untimely by the federal court.  The opinion addresses several distinct issues: (1) the flexibility of the concept of “privity” in applying the doctrine of res judicata to the parties and “those in privity” with the parties; (2) a finding of “privity” can be based upon the plaintiff’s allegations about the relationship between a party and another entity; (3) a party which makes a strategic decision to first bring an action in one jurisdiction “is bound by the effects of the path it charted…”; and (4) dismissal of the complaint pursuant to CPLR 3211(a)(4) in favor of the earlier-filed federal action was warranted under New York’s “first-in-time” rule.  Syncora Guar Inc v JP Morgan Sec LLC, 2013 NY Slip Op 05602, 1st Dept, 8-13-13

 

Intervention Not Available to Vacate a Default Judgment—Default Judgment is Not on the Merits and Therefore Has No Res Judicata Effect on Putative Intervenors

The First Department determined a motion to intervene in an action which ended in a default judgment should not have been granted.  Plaintiff sued defendant, which defaulted. Defendant had transferred its assets to the parties seeking to intervene to vacate the default.  Plaintiff had sued the intervenors alleging the transfer of assets from the defendant to the intervenors was fraudulent (the “supplemental proceeding”). The First Department explained:

“[T]he potentially binding nature of the judgment on the proposed intervenor is the most heavily weighted factor in determining whether to permit intervention” … .Here, however, intervenors cannot intervene by arguing that the default judgment has a res judicata effect on the supplemental proceeding and adversely affects their rights in that proceeding. The default judgment has no res judicata effect on intervenors because a default is not a determination on the merits as is necessary to invoke that doctrine … . Likewise, intervenors were not parties to the default action … .  Further, plaintiffs did not obtain the default judgment through fraud or through any other wrongdoing… .  Intervenors’ right to act for defendant ended with the 2007 sale—an event that occurred four years before the clerk entered the default judgment against [defendant].  Amalgamated Bank v Helmsley-Spear, Inc, 2013 NY Slip Op 05600, 1st Dept 8-13-13

 

Motion for Summary Judgment in Lieu of Complaint Should Have Been Denied—Question of Fact Re: Whether Spanish Document Was a Judgment

The First Department determined that a motion brought pursuant to CPLR 3213 to enforce a Spanish court’s award of damages against the defendant should not have been granted.  Experts disagreed about whether the Spanish document was an enforceable judgment.  The First Department explained the criteria for recognizing foreign decrees (CPLR 5302) and for determining a motion for summary judgment in lieu of a complaint (CPLR 3213):

A motion for summary judgment in lieu of a complaint (CPLR 3213) is based on an “instrument for the payment of money only or upon any judgment.” The statute allows a plaintiff an expedited procedure for entry of a judgment by filing and service of a summons and a set of motion papers that contain sufficient evidentiary detail for the plaintiff to establish entitlement to summary judgment (see David D. Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C3213:8).

CPLR 5302 provides that New York will recognize foreign decrees that are “final, conclusive and enforceable where rendered even though an appeal therefrom is pending.” Here, the parties’ Spanish law experts disagree as to whether the document here, denominated a “ruling” (“auto” in Spanish), is enforceable as a judgment. *  *  *

The conflicting evidence as to whether the ruling is final, conclusive and enforceable in Spain precludes plaintiff from obtaining an accelerated judgment pursuant to CPLR 3213.  Sea Trade Mar Corp v Coutsodontis, 2013 NY Slip Op 05599, 1st Dept 8-13-13

 

Courts Have Discretion to Grant Affirmative Relief in Absence of a Formal Cross-Motion

In a full-fledged opinion by Justice Balkin, the Second Department determined trial courts have the discretion to determine applications made in the absence of the formal requirements of a cross-motion.  In this case the defendant answered a motion for a default judgment demonstrating a reasonable excuse and a meritorious defense. Included in the answering papers was an application for leave to serve a late answer to compel plaintiff to accept the answer.  Supreme Court granted all the requested relief.  The plaintiff appealed on the ground that the affirmative relief should have been requested through a formal cross-motion.  The Second Department wrote:

Given the language of CPLR 2215, and the contexts in which it is applicable, the most reasonable interpretation of the statute is that a party seeking relief in connection with another party’s motion is, as a general rule, required to do so by way of a cross motion, at least to have a right that the request be determined on the merits. Otherwise, a party who seeks relief by way of a notice of cross motion would be in a position less favorable than that of a party who merely makes the request without a notice of cross motion: the party who makes a formal cross motion would be required to comply with the notice and service requirements and deadlines imposed by the statute, but a party seeking relief merely by requesting it would enjoy greater flexibility.

Nonetheless, courts retain discretion to entertain requests for affirmative relief that do not meet the requirements of CPLR 2215. Litigants, however, must be cognizant of an important distinction between the two situations: a party in compliance with CPLR 2215 is entitled to have its cross motion considered; a party not in compliance with the statute must hope that the court opts, in the exercise of its discretion, to entertain the request. Thus, we are in agreement with our colleagues in the Appellate Division, 3rd Department, who, in Fox Wander W. Neighborhood Assn. v Luther Forest Community Assn. (178 AD2d at 872), held that, even in the absence of an explicit notice of cross motion, the Supreme Court is not “prohibited” from entertaining the nonmoving party’s request for relief.  Fried v Jacob Holding Inc, 2013 NY Slip Op 05555, 2nd Dept 8-7-13

 

Complaint Can Not Be Deemed Dismissed in Absence of Final Judgment

In reversing Supreme Court, the Second Department determined a complaint had not been dismissed because no final judgment dismissing the complaint had been entered after an order vacating a default:

…[T]he Supreme Court issued an order granting the defendant’s motion to vacate his default in appearing and answering the complaint on the ground of lack of personal jurisdiction. However, no judgment dismissing the complaint on the ground of lack of personal jurisdiction was entered. The plaintiff subsequently moved to extend her time to serve the defendant with process in the action. …[T]he court denied the plaintiff’s motion on the ground that its prior order had dismissed the action and, thus, there was no pending action in which to grant an extension of time for service of process … . On her appeal from the August 13, 2012, order, the plaintiff contends that, inasmuch as there was no judgment dismissing the action, the action was pending when she moved to extend the time to serve the defendant with process. We agree. An action is deemed pending until there is a final judgment (see CPLR 5011…)… .  Cooke-Garrett v Hoque, 2013 NY Slip Op 05554, 2nd Dept 8-7-13

 

Supreme Court Does Not Have the Power to Dismiss a Complaint for Delay in Prosecution Absent 90-Notice (CPLR 3216)

The Second Department reversed Supreme Court’s dismissal of a complaint based on delay in prosecuting the action because the 90-day demand (CPLR 3216) had not been served on the plaintiff.  The First Department wrote:

CPLR 3216 permits a court to dismiss an action for failure to prosecute only after the court or the defendant has served the plaintiff with a written demand requiring the plaintiff to resume prosecution of the action and to serve and file a note of issue within 90 days after receipt of the demand, and also stating that the failure to comply with the demand will serve as the basis for a motion to dismiss the action. Here, the Supreme Court did not possess the power to dismiss this pre-note of issue action on the ground of a general lack of prosecution since the plaintiff had not received a 90-day demand pursuant to CPLR 3216(b) requiring the plaintiff to serve and file a note of issue … .  Armouth-Levy v New York City, 2013 NY Slip Op 05551, 2nd Dept, 8-7-13

 

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Criteria for Prohibition Explained

In determining that prohibition did not lie to challenge the appointment of a special district attorney to investigate election law issues, the Second Department explained:

” [A]n article 78 proceeding in the nature of prohibition will not lie to correct procedural or substantive errors of law'” (Matter of Soares v Herrick, 20 NY3d 139, 145, quoting Matter of Schumer v Holtzman, 60 NY2d 46, 51). Rather, “the extraordinary remedy of prohibition may be obtained only when a clear legal right of a petitioner is threatened by a body or officer acting in a judicial or quasi-judicial capacity without jurisdiction in a matter over which it has no power over the subject matter or where it exceeds its authorized powers in a proceeding of which it has jurisdiction” … . Even where prohibition is an available remedy, it ” is not mandatory, but may issue in the sound discretion of the court'” … . ” In exercising this discretion, various factors are to be considered, such as the gravity of the harm caused by the excess of power, the availability or unavailability of an adequate remedy on appeal or at law or in equity and the remedial effectiveness of prohibition if such an adequate remedy does not exist'” … .

Prohibition is an available remedy to void the improper appointment of a Special District Attorney pursuant to County Law § 701 when the Special District Attorney is performing the quasi-judicial act of representing the State in its efforts to bring individuals accused of crimes to justice … . However, it is not an available remedy when the Special District Attorney is performing the purely investigative function of investigating “suspicious circumstances” with a view toward determining whether a crime has been committed, since, in such circumstances, his or her acts are to be regarded as executive in nature … . Here, the WFP failed to establish that Special District Attorney Adler was performing a quasi-judicial act. Accordingly, prohibition does not lie.  Matter of Working Families Party v Fisher, 2013 NY slip Op 05578, 2nd Dept 8-7-13

 

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No Article 78 Review Where Petitioner Defaulted

The Second Department noted that there can be no Article 78 review where the petitioner defaulted in the administrative proceeding.  Only the denial of the request to vacate the default can be reviewed:

“[A] petitioner is not aggrieved by an administrative determination made on his [or her] default and may not seek to review such a determination”… . Although the petitioner is not entitled to CPLR article 78 review of the Review Board’s determination to sustain the charges and revoke its registration, which was made upon its default, the Review Board’s determination to deny its application to vacate the default may be reviewed… .  Matter of Tony’s Towing Serv Inc v Swarts, 2013 NY Slip Op 05577, 2nd Dept 8-7-13

 

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