My N.Y. Court of Appeals Filing

Yesterday I filed the appellant's reply brief in the New York Court of Appeals in Matter of the Estate of Lena Hausman. The case raises the question of whether the de facto corporation doctrine should be applied to a limited liability company (LLC).

Under the de facto doctrine the business transactions of a corporation will be deemed valid although the corporate organizers have not completed all the statutory steps required to be de jure. In a typical case, the corporate organizers will prepare the certificate of incorporation and then engage in corporate business before they actually file the certificate with the Secretary of State. In other instances, organizers file the certificate with the Secretary of State, engage in corporate business, and then learn that either the certificate or the filing itself is defective. The Court of Appeals has recognized the de facto doctrine for at least 150 years. The Court last looked at the doctrine in 1958.

In Hausman a LLC was named the grantee in a deed which was signed by the grantor after the organizers executed the LLC Articles of Organization and the LLC Operating Agreement, but 14 days before the Articles of Organization were filed with the Secretary of State. The question before the Court is whether the LLC could take title as a de facto LLC, or whether the real property is still part of the grantor's estate.

I did not appear in the lower courts. The losing party in the Appellate Division brought me in to make the motion for leave to appeal to the Court of Appeals. The motion was granted in January. Oral argument will be on October 20.

Judge Sotomayor: Senate Committee Scheduled to Vote Tomorrow

The United States Senate Judiciary Committee is scheduled to vote tomorrow morning on whether to confirm Judge Sonia Sotomayor to be an Associate Justice of the United States Supreme Court. At the request of the minority Republicans on the Committee, the vote was postposed for one week.

If the majority of the Committee, as expected, votes in favor of President Obama's nomination, it is anticipated that a vote of the full Senate will occur prior to the Senate recess in August.

While the Supreme Court begins its new Term with oral arguments on October 5, on September 9 it will hear oral arguments on an election finance case which was set down for reargument from last Term. If Judge Sotomayor's nomination is approved by the Senate in August, she presumably will be on the bench for the September 9 argument.

Judge Sotomayor: Senate Committee Vote Postponed One Week

The Senate Judiciary Committee was scheduled to vote this morning on the nomination of Judge Sonia Sotomayor to be an Associate Justice of the United States Supreme Court. The vote has been postponed one week to July 28.

Keeping Up with the CPLR

If you litigate in the New York state courts a good understanding of the CPLR is, of course, essential. Each week there is a host of appellate and trial court opinions interpreting the CPLR. Keeping abreast of developments is difficult and very time consuming.

One way to keep current, and to get a valuable and free research tool, is to read thecplrblog.com, an almost daily roundup of cases addressing the CPLR. It is published by attorney David M. Gottlieb, and can be found here.

Of particular value is the blog's research capabilities: you can find cases reported on the blog either by CPLR section number, or by topic. Take a look. I think you will find it very useful.

Second Circuit: Claim Barred by Statute of Limitations in State Court Can be Brought in Federal Court

If an action is dismissed by the New York State courts on the grounds the action is barred by the statute of limitations, can the identical claim then be brought in federal court where the statute of limitations is longer?

In Cloverleaf Realty of New York, Inc. v. Town of Wawayanda the United States Court of Appeals for the Second Circuit today answers that question "Yes." The decision can be found here.

Following a public hearing, the town of Wawayanda, New York, imposed a special tax assessment on property owners. Property owner Cloverleaf brought a declaratory judgment action in state court arguing, inter alia, that the assessment violated procedural due process because the town had posted notice of the public hearing in a newspaper advertisement instead of providing actual notice by mail to property owners. The state court dismissed the action on the grounds it was commenced after the four-month statute of limitations under CPLR § 217.

Cloverleaf then brought an action in federal court under 42 U.S.C. § 1983 again alleging that the failure to give notice by mail violated due process of law. The District Court dismissed the action on the grounds the prior dismissal in the state court barred the action in federal court.

The Second Circuit reversed the dismissal and reinstated the claim. The statute of limitations for a § 1983 action in the New York federal courts is three years. The traditional rule is that a dismissal on statute-of-limitations grounds is not a determination on the merits--it bars the remedy but does not extinguish the right. Therefore, an action dismissed for untimeliness in one jurisdiction, can be brought in another jurisdiction with a longer statute of limitations.

The Second Circuit's examination of New York law leads it to conclude that New York follows the traditional rule. Because the state dismissal of Cloverleaf's claim was not a determination on the merits, the action can be brought in federal court where the statute of limitations is longer.

Cloverleaf Realty is important because there are many New York state claims which have a constitutional ingredient that are dismissed for untimeliness. The case raises the possibility that some of those claims can be brought anew in federal court.

Arbitration Award: First Department Reverses Itself and Adopts Second Department View

There is no en banc procedure in the four New York State Appellate Divisions as there is in the United States Courts of Appeals. As a result, when a panel of an Appellate Division issues a ruling it becomes Department precedent and will be followed by later panels until the New York Court of Appeals rules otherwise, or, if the ruling involves the interpretation of stature, the Legislature changes the law.

Today, however, in a major opinion interpreting when a court must confirm an arbitration award under CPLR § 7510, a panel of the the Appellate Division, First Department, rules that it will not follow First Department precedent, but will instead adopt a Second Department ruling to decide the case before the panel. Today's ruling, In re Bernstein Family Limited Partnership v. Sovereign Partners, L.P., can be found here.

In Organization of Staff Analysts v. City of New York, 277 A.D.2d 23 (2000), the First Department had ruled that the lower court correctly dismissed as moot a petition to confirm an arbitration award because the award had been completely satisfied. In Mtr. of Allstate Ins. Co. v. Dental Health Care, P.C., 24 A.D.3d 437 (2005), the Second Department reached the opposite conclusion, ruling that under CPLR § 7510 a party is entitled to confirmation of an arbitration award regardless of the fact that there has been compliance with the award.

In today's ruling the First Department panel concludes that the Second Department is correct, and it declines to follow its own precedent in Organization of Staff Analysts.

Today's ruling offers three reasons for rejecting First Department precedent. First, the panel states that the reliance in Organization of Staff Analysts on a particular section of the CPLR was "misplaced." Second, the panel acknowledges that the Second Department's reading of CPLR § 7510 better conforms to the plain words of the statute than Organization of Staff Analysts. But it is the third reason is that startling.

Today's decision states that the parties in Organization of Staff Analysts "did not alert this Court" to the fact that the Court of Appeals affirmed a Fourth Department ruling which had reached the opposite conclusion from Organization of Staff Analysts. The Court of Appeals ruling, however, came in 1983, or 17 years prior to Organization of Staff Analysts.

The acknowledgement that the First Department was unaware of a Court of Appeals ruling is, of course, disturbing. Plainly the attorneys can be faulted because they did not "alert" the First Department that the Court of Appeals had affirmed the Fourth Department ruling 17 years before. But today's decision is an implicit acknowledgment that the First Department itself had not shepardized the Fourth Department decision when it decided Organization of Staff Analysts in 2000.

The message here is clear: busy appellate courts do rely on the work of appellate counsel, and however careful a court is, something important can slip past it if not brought to its attention by appellate counsel.

Finally, today's ruling is a good example of when an Appellate Division panel should decline to follow Department precedent. Court of Appeals authority belatedly has been brought to its attention, and the decisions in other Departments correctly apply that authority. There is no point in waiting for the Court of Appeals to say First Department precedent is wrong.

My Appellate Filings This Week

The New York appellate courts are in recess. This means there will no oral arguments in the New York Court of Appeals and the four Appellate Divisions in July and August. The Appellate Divisions will, however, continue to hand down decisions on cases argued through the end of June, although at a slower pace than during the rest of the year.

Recess for the appellate courts, however, does not translate into recess for appellate counsel. Over the summer lawyers for appellants and respondents must submit briefs for cases that will be argued in the Fall.

I had two filings this week. First, I submitted a lengthy letter to Judge Theodore T. Jones of the New York Court of Appeals in support of an application for leave to appeal to that Court. While applications for leave to appeal in civil cases go to the entire Court, applications in criminal cases go to a single judge of the Court. In 2008 there were 2,637 criminal leave applications. The judges granted 53, or a grant rate of 2%. While I have secured leave in criminal cases, and I think the issues raised in this application are worthy of Court of Appeals attention, one cannot be sanguine when filing a criminal leave application.

My second filing this week was an appellant's supplemental brief in the Appellate Term, First Department. The brief questions the propriety of a criminal bench trial to a blind judge when photographic evidence was central to the prosecutor's and the defendant's case.

My next filing this month will be an appellant's reply brief in a civil case in the New York Court of Appeals. Matter of Lena Hausman, Deceased.

I did not appear for any of the parties in the lower courts in Hausman. The losing side in the Appellate Division brought me in to try to get the case into the Court of Appeals. In January the Court granted my motion for leave to appeal. The case will be orally argued in October.

In 2008 there were 1,093 motions seeking leave to appeal to the Court of Appeals in civil cases. The Court granted 74 motions, a grant rate of 6.8%

Appellate Division: Major Opinion on Suing Defendant Whose Identity is Unknown

Plaintiff's counsel does not always know the identity of all the defendants when a civil action is commenced. Pursuant to CPLR § 1024 he can, however, commence an action against "John Doe" or "Jane Doe."

Under CPLR § 306-a an action is commenced by filing it with the county clerk. Pursuant to CPLR § 306-b service must then be made on the defendant within 120 days after the filing.

But what does plaintiff's counsel do if he still does not know the defendant's identity within the 120 days? And what if he learns of her identity after the 120 days?

In a major ruling, Bumpus v. New York City Transit Authority, the Appellate Division, Second Department, answers these questions and lays out a detailed roadmap for counsel facing the prospect of suing a defendant whose identity is not known.

Bumpus is must reading for plaintiffs' counsel. The decision can be found here.

Judge Sotomayor Confirmation Hearings Begin Monday

Hearings before the Senate Judiciary Committee on whether Judge Sonia Sotomayor should be confirmed to replace Justice Souter on the United States Supreme Court begin on Monday. News accounts indicate that Republicans do not expect they will be able to stall or block the judge's confirmation.

Over the past few weeks a wealth of material has appeared analyzing Judge Sotomayor's rulings on the United States District Court and the United States Court of Appeals for the Second Circuit. The plain intent of much of the material is to present her as a moderate liberal well within the legal mainstream.

One report of particular interest is the study released earlier this week by the majority staff of the Senate Judiciary Committee, "Sonia Sotomayor: The Criminal Justice Record." The report shows that while sitting on the Second Circuit, Judge Sotomayor voted to affirm criminal convictions 92% of the time, and in criminal cases voted with Republican-appointed judges on the court 97% of the time. The full report can be found here.

The Judiciary Committee has posted all the material submitted to the Committee in connection with the confirmation process. The material can be found here.

Yesterday, Senator Patrick Leahy, chairman of the Senate Judiciary Committee released the names of the witnesses who will be called by the majority Democrats and the minority Republicans. The list can be found here.

I have said before that at the confirmation hearings Judge Sotomayor's most discussed decision will be Ricci v. DeStefano, in which the Supreme Court reversed the Second Circuit panel on which Judge Sotomayor sat, and held that New Haven could not decline to certify a fire department promotion examination on the grounds the examination results had a disparate impact on minorities. One of the Republican minority witnesses will be Frank Ricci, the lead plaintiff in the case.

To bolster Judge Sotomayor's moderate liberal and law enforcement credentials, the Democratic majority witnesses will include the national president of the Fraternal Order of Police, former FBI Director Louis Freeh, former United States Attorney for the Southern District of New York Michael Garcia, and Manhattan District Attorney Robert Morgenthau.

Appellate Division: Care for Ill Parent Not Abandonment of "Primary Residence"

One of the major legal battlegrounds between landlords and tenants who occupy rent stabilized apartments in New York City is whether the apartment is the tenant's "primary residence." If it is not the tenant's primary residence, the landlord is entitled to evict the tenant and relet the apartment at market rent.

A primary residence has been construed by the courts as "an ongoing, substantial, physical nexus with the...premises for actual living purposes."

In a matter of first impression, the Appellate Division, First Department, ruled today that a tenant's nearly two-year absence from her New York apartment to care for her ill parents in California did not constitute the abandonment of her primary residence. 542 East 14th Street LLC v. Lee.

The court noted that during the two-year period the tenant's teenage daughter continued to reside in the apartment while she attended high school, the tenant never voted in California, never rented or owned any realty in California, listed her New York apartment on her tax returns, maintained bank accounts in New York, periodically returned to New York, and kept her furnishings and personal possessions at the apartment.

"The evidence presented in this case," the Court concluded, "supports the trial court's findings that tenant maintained an ongoing substantial physical nexus to the New York apartment and that she did not abandon the subject stabilized premises but maintained it as her primary residence while she was temporarily in California caring for her infirm elderly parents."

Caring for an ill elderly parent is not a unique circumstance. The case is important for clarifying that a protracted absence from New York City to care for a parent will not alone constitute the abandonment of a primary residence.

New York and the Second Circuit in the U.S. Supreme Court

In the Term of the United States Supreme Court which concluded at the end of June, the State of New York had a direct interest in two cases: New York prevailed in one case, and lost in the other.

In Haywood v. Drown the Court by a 5-4 vote reversed the New York Court of Appeals and held unconstitutional Correction Law § 24 which bars federal 42 U.S.C. § 1983 civil rights suits for monetary damages against correction officers in New York trial courts. Under the statute, such suits must be brought against the State in the Court of Claims, which does not have trial by jury and cannot award counsel fees.

Justice Stevens' majority opinion notes the dissent by Judge Jones in the Court of Appeals, and adopts much of his reasoning.

In Cuomo v, Clearing House Association a divided Supreme Court overruled the United States Court of Appeals for the Second Circuit and concluded that principles of federal preemption do not prohibit New York State's Attorney General from bringing judicial proceedings to enforce state laws against national banks.

The Supreme Court reviewed only one case from the New York Court of Appeals--the above mentioned Haywood v. Drown--and reversed the Court of Appeals.

The United States Court of Appeals for the Second Circuit fared only slightly better. The Supreme Court reviewed nine of its rulings, affirming two of them, and reversing seven of them--a reversal rate of 77.8%.

This was not the worst reversal rate for the federal circuit courts. The Court reversed all of the cases it reviewed from the Fourth, Sixth, Seventh, Eighth, Tenth, and D.C. Circuits. The Court reviewed 16 cases from the NInth Circuit--often seen as the most liberal circuit--and reversed 13 of them, a reversal rate of 81.25%.

The "Circuit Scorecard" can be found at scotusblog.

Appellate Division Adopts "Single Employer Doctrine" for Human Rights Law

Under New York's Human Rights Law an employer is prohibited from discharging an employee because of her sex. Executive Law § 296(1)(a). Case law establishes that this includes discharging her because she is pregnant. Executive Law § 292(5) states that "[t]he term 'employer' does not include any employer with fewer than four persons in his employ."

The Appellate Division, Second Department, in a matter of first impression in New York, has now ruled that in determining whether an employer has four or more employees, and is therefore covered by the Human Rights Law, it is proper to aggregate all the employees who work for interrelated business entities. Matter of Argyle Realty Associates v. New York State Division of Human Rights.

While the payroll records of the realty company for which a woman worked showed it had three or fewer employees, the evidence showed that the company had common management, common ownership, and common financial control with two other companies. Following the example of the National Labor Relations Board, and the example of federal courts in enforcing federal civil rights laws, the Appellate Division rules it will adopt the "single employer doctrine" and aggregate the number of employees of the realty company and its interrelated companies to find that the "employer" has four or more employees and is, therefore, covered by the Human Rights Law. The Court concluded that there is substantial evidence the employer discharged the employee because she was pregnant.