Trial Court Rules Amended to Clarify Requirements for Redaction of Confidential Personal Information

On November 6, 2014, the Chief Administrative Judge signed an order adding subdivision (e) to Rule 202.5. the new rule clarifies counsel’s obligation to redact confidential personal information from court filings. The new rule provides:

(e) Omission or Redaction of Confidential Personal Information.
(1) Except in a matrimonial action, or a proceeding in surrogate’s court, or a proceeding pursuant to article 81 of the mental hygiene law, or as otherwise provided by rule or law or court order, and whether or not a sealing order is or has been sought, the parties shall omit or redact confidential personal information in papers submitted to the court for filing. For purposes of this rule, confidential personal information (“CPI”) means:
i. the taxpayer identification number of an individual or an entity, including a social security number, an employer identification number, and an individual taxpayer identification number, except the last four digits thereof;
ii. the date of an individual’s birth, except the year thereof;
iii. the full name of an individual known to be a minor, except the minor’s initials; and
iv. a financial account number, including a credit and/or debit card number, a bank account number, an investment account number, and/or an insurance account number, except the last four digits or letters thereof.
(2) The court sua sponte or on motion by any person may order a party to remove CPI from papers or to resubmit a paper with such information redacted; order the clerk to seal the papers or a portion thereof containing CPI in accordance with the requirement of 22NYCRR §216.1 that any sealing be no broader than necessary to protect the CPI; for good cause permit the inclusion of CPI in papers; order a party to file an unredacted copy under seal for in camera review; or determine that information in a particular action is not confidential. The court shall consider the pro se status of any party in granting relief pursuant to this provision.
(3) Where a person submitting a paper to a court for filing believes in good faith that the inclusion of the full confidential personal information described in subparagraphs (i) to (iv) of paragraph (1) of this subdivision is material and necessary to the adjudication of the action or proceeding before the court, he or she may apply to the court for leave to serve and file together with a paper in which such information has been set forth in abbreviated form a confidential affidavit or affirmation setting forth the same information in unabbreviated form, appropriately referenced to the page or pages of the paper at which the abbreviated form appears.
(4) The redaction requirement does not apply to the last four digits of the relevant account numbers, if any, in an action arising out of a consumer credit transaction, as defined in subdivision (f) of section one hundred five of the civil practice law and rules. In the event the defendant appears in such an action and denies responsibility for the identified account, the plaintiff may without leave of court amend his or her pleading to add full account or CPI by (i) submitting such amended paper to the court on written notice to defendant for in camera review or (ii) filing such full account or other CPI under seal in accordance with rules promulgated by the chief administrator of the courts.

Appellant’s Arguments Rejected Based on Judicial Estoppel

On October 21, 2014, the First Department issued a decision in Bank Hapoalim B.M. v. Westlb AG, 2014 NY Slip Op. 07092, rejecting arguments made on appeal when the appellants had taken contrary positions at trial.

In Bank Hapoalim, the plaintiffs were “investors in a structured investment vehicle” who sued the defendant financial institutions regarding the investment. In reviewing the trial court’s decision the First Department noted as an initial matter that:

[O]n this appeal, plaintiffs are judicially estopped from asserting their position on choice of law, as they consistently argued to the motion court that New York law governed the case and that their arguments relied on New York law. A party may not adopt a position on appeal at odds with its arguments to the trial court, and plaintiffs cite no law to the contrary.

Similarly, plaintiffs are judicially estopped from arguing that the Income Notes should be treated as debt, since they argued repeatedly to the motion court that the Income Notes should be treated as equity. Indeed, plaintiffs concede that they previously argued in favor of the proposition that the notes were equity, but now assert that they may argue that the Income Notes are equity for some purposes and debt for others.

(Internal citations omitted).

A Cautionary Tale Regarding Procedural Pitfalls: Part 2

In yesterday’s post on the October 1, 2014, decisions by Justice Oing of the New York County Commercial Division in Loreley Financial (Jersey) No. 3, Ltd. v. Morgan Stanley & Co. Inc., 2014 NY Slip Op. 32622(U) and 2014 NY Slip Op 32624(U), we discussed the decision in 2014 NY Slip Op 32624(U), in which the court held that despite having been given leave to file an amended complaint, the court had no jurisdiction to hear the amended complaint the plaintiffs filed after judgment dismissing the action had been entered. This post looks at the decision in 2014 NY Slip Op. 32622(U), in which the court addressed the defendants’ motion to dismiss the plaintiffs’ newly-filed action on statute of limitations ground.

The plaintiffs’ new action was not filed within the limitations period for their claims.  The plaintiffs argued that the newly-filed “action relates back to the prior action because they filed it within six months of withdrawing the appeal of the prior action.”  The court disagreed, explaining:

CPLR 205[a] provides that where an action is terminated, the plaintiff may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination. Termination, for purposes of CPLR 205[a], occurs when appeals as of right are exhausted. In other words, the six month period runs from the date of entry of the order determining [the] appeal. The question, which appears to be one of first impression, is when does the six month period begin to run where there is a voluntary withdrawal of a timely appeal–at the time of the voluntary withdrawal, which would necessarily require a finding that such act should be deemed an appellate determination, or at the time the appealed order herein was entered, namely July 1, 2013. In resolving this issue, this Court is mindful of the following observation: “it is not the purpose of the statute to permit a party to extend the time to commence a new action by merely taking appellate action.”

Keeping that underlying principle in mind, this Court holds that plaintiffs’ voluntary withdrawal is not an appellate determination. Indeed, plaintiffs never perfected the appeal prior to withdrawing it. By doing so, for the purposes of CPLR 205[a], plaintiffs did not take an appeal. Procedurally, had they perfected their appeal, an order would have been required to have the appeal dismissed. In that circumstance, the six month statute of limitations would have run from that dismissal order. Given that plaintiffs chose to withdraw their unperfected appeal, the termination date is July 1, 2013, the date in which this Court’s order dismissing the prior action was entered. As such, this action is untimely.

(Internal quotations and citations omitted) (emphasis added).

The Loreley Financial decisions show how procedural pitfalls can trap counsel. One can understand how the plaintiffs in Loreley Financial thought that their claims were preserved–they had permission to replead, a stipulation staying the time to move and a timely-filed original action. But the court found otherwise. We look forward to seeing what the First Department does with these decisions.

A Cautionary Tale Regarding Procedural Pitfalls: Part 1

On October 1, 2014, Justice Oing of the New York County Commercial Division issued two decisions in Loreley Financial (Jersey) No. 3, Ltd. v. Morgan Stanley & Co. Inc., 2014 NY Slip Op. 32622(U) and 2014 NY Slip Op 32624(U), illustrating the importance of keeping an eye on the rules of practice.

This post focuses on the decision in 2014 NY Slip Op 32624(U), in which the court held that despite having been given leave to file an amended complaint, the court had no jurisdiction to hear the amended complaint the plaintiffs filed after judgment dismissing the action had been entered.

In Loreley Financial, the plaintiffs asserted claims of rescission, fraud, fraudulent conveyance, and unjust enrichment. On June 20, 2013, the trial court issued a decision dismissing their complaint but granting leave to replead under the same index number. The plaintiffs filed a notice of appeal and

the parties entered into a stipulation staying plaintiffs’ time to move to renew and reargue, and defendants’ time to respond to any amended complaint until a party or the Court lifted the stay. The stipulation also provided that the parties reserved all rights, and defendants did not consent to an amended complaint by signing the stipulation.

The stipulation did not prevent the defendants from seeking entry of a judgment of dismissal, and they did so. Plaintiffs did not move to vacate the judgment when it was entered.

Over seven months after the judgment dismissing the action was entered, the plaintiffs filed an amended complaint and, later, withdrew their appeal, which they had not perfected. Plaintiffs also filed “a new, identical action under” a new index number. The defendants moved to dismiss the amended complaint in the original action, arguing that the court lacked subject-matter jurisdiction to hear the amended complaint because the Clerk had entered judgment dismissing the action. The court agreed, explaining:

Nothing in this Court’s prior ruling as set forth on the record precluded defendants from exercising their rights, including having a judgment entered dismissing the action. Thus, defendants correctly point out that post dismissal filings, such as plaintiffs’ April 3, 2014 amended complaint, are nullities because there is no longer an active case. Indeed, nothing in this Court’s decision to grant plaintiffs leave to file an amended complaint can be deemed to countermand the provisions of the CPLR regarding terminated actions and subsequent filings, or defendants’ right to seek entry of a judgment of dismissal.

(Internal quotations and citations omitted) (emphasis added).

The court went on to discuss why the plaintiffs could not “take refuge in the safe harbor provisions of CPLR 5019 and 5015.” As to CPLR 5019(a), which relates to errors in judgments that are “mistake[s], defect[s] or irregularit[ies] not affecting a substantial right of a party,” the court held that it did not apply because the relief the plaintiffs sought was substantive. As to the court’s prior order granting leave to replead, the court explained that while it “noted that plaintiffs have a right to file an amended complaint, this Court did not state that such right would be absolute, and that it would not have to yield to other provisions of the CPLR.”

According to the court, once the judgment was entered, the plaintiffs’ “options were to appeal, or move to vacate the judgment pursuant to CPLR 5015. Here, plaintiffs took an appeal, but withdrew it prior to perfecting it. Given that plaintiffs filed an amended complaint, rather than pursue their appeal, the issue then is whether CPLR 5015 provides a basis to vacate the judgment so as to permit the amended complaint to go forward.” As the court explained, CPLR 5015 also provided no basis for the relief the plaintiffs sought:

CPLR 5015(a) provides that a court may relieve a party from a judgment on the grounds of excusable default, newly-discovered evidence after trial, fraud, misrepresentation, or other misconduct, lack of jurisdiction to render the initial judgment, or reversal, modification, or vacatur of the initial judgment. This list is not exhaustive, an a court retains the inherent power to vacate its own judgment for sufficient reason and in the interests of substantial justice. This authority, however, is not plenary, and should only be used in cases of fraud, mistake, inadvertence, surprise or excusable neglect. Indeed, a motion to vacate an order pursuant to CPLR 5015 cannot serve as a substitute for an appeal, or remedy an error of law that could have been addressed on a prior appeal.

Here, the record clearly does not reflect the existence of any of the enumerated bases to warrant vacatur of the instant judgment pursuant to CPLR 5015[a]. Indeed, there was no fraud, and the Clerk did not enter judgment of dismissal inadvertently or by mistake. Nor can plaintiffs claim surprise or neglect, as they filed an opposition to entry of judgment before the Clerk entered the judgment. Indeed, although permitted to do so, plaintiffs did not submit a proposed counter-judgment that could have included language preserving their right to file an amended complaint. As such, any purported error in not including such language is not chargeable to the Clerk. There has been no default, no reversal of this Court’s prior decision and order, no challenge to this Court’s jurisdiction to render its prior decision and order, and no misconduct by defendants. Lastly, plaintiffs do not assert that the judgment should be vacated due to newly-discovered evidence. Under these circumstances, vacatur of the judgment is not warranted.

(Internal quotations and citations omitted).

But what of the new action the plaintiffs had filed? Weren’t their claims saved by filing a new action? That is the subject of tomorrow’s post.

Defendants Sued in Their Individual Capacities Cannot Bring Counterclaims as Trustees or Agents for Non-Parties, Nor Bring Counterclaims Against Non-Parties who Allegedly Control a Party

On September 23, 2014, Justice Friedman of the New York County Commercial Division issued a decision in Mutual Benefits Offshore Fund v. Zeltser, 2014 NY Slip Op. 32467(U), dismissing counterclaims brought against non-parties.

The opinion in Mutual Benefits Offshore Fund discusses a series of unsuccessful attempts by some underlying defendants (counterclaim plaintiffs) to assert counterclaims against plaintiff MBOF and non-parties.

CPLR 3019(a) provides: “A counterclaim may be any cause of action in favor of one or more defendants or a person whom a defendant represents against one or more plaintiffs, a person whom a plaintiff represents or a plaintiff and other persons alleged to be liable.” It is well-settled that the intent of CPLR 3019(a) is to limit counterclaims against a plaintiff who sues in a particular capacity to those related to that capacity, and to limit a defendant who is sued in a particular capacity to counterclaims related to that capacity.

(Internal quotations and citations omitted).

In a first attempt to assert counterclaims, the counterclaim plaintiffs asserted claims against MBOF, which were denied on a prior motion because they were asserted by the counterclaim plaintiffs as agent for and as trustee for a third party. The court held that, because the counterclaim defendants had only been sued in their individual capacities, they could not bring counterclaims in a different capacity as agents or trustees.

Then, in a second attempt to assert counterclaims, the counterclaim plaintiffs asserted claims against non-parties that allegedly controlled MBOF. The counterclaim plaintiffs argued that this was proper because MBOF “represented” the new defendants, in that the new defendants were using MBOF and brought suit in its name to represent their personal interests. The court rejected this attempt too, on the grounds that a corporation and those controlling it are not “co-extensive for purposes of asserting a counterclaim . . . . the counterclaim must assert a cause of action against the party plaintiff and that if the counterclaim be not properly interposed against the plaintiff, it is not proper as to the others.” (Internal citation omitted.)

As to whether MBOF “represents” the non-parties, the court held that:

Counterclaim Plaintiffs’ interpretation of ‘a person whom a plaintiff represents’ to include any individual or entity which allegedly controls a plaintiff would broaden the language of the statute so as to render it virtually without limitation. This is not an instance where an administrator, trustee, liquidator or the like has brought suit on behalf of MBOF and Counterclaim Plaintiffs seek to assert claims directly against MBOF. Instead, Counterclaim Plaintiffs attempt to interpose liability on Counterclaim defendants in their capacities either as separate corporate entities or as individuals.

The Counterclaim Plaintiffs were therefore directed to commence a new action if they wished to proceed “against the Counterclaim Defendants, if timely and otherwise proper.”

Opportunity to Comment on Proposed Change to Commercial Division Rules

The Office of Court Administration has asked for public comment on another proposed change to the rules of the Commercial Division.

The proposed new rule:

provides that if the court’s Part Rules address discovery disputes, those Part Rules will govern. If the court’s Part Rules are silent with respect to discovery disputes, the following procedures would apply. If counsel are unable to resolve a dispute after consulting in good faith, counsel for the moving party would be required to submit to the court a letter not exceeding three single-spaced pages in length outlining the nature of the dispute and requesting a telephone conference. The opposing party would have four business days to submit a responsive letter, after which the court would schedule a telephone or in-court conference with counsel. The proposal provides that failure to comply with this procedure may result in a motion being held in abeyance until the court has the opportunity to conference the matter. If the parties need to make a record, they would still have the opportunity to submit a formal motion.

E-mail comments to rulecomments@nycourts.gov by November 25, 2014.

Opportunity to Comment on Proposed Change to Commercial Division Rules

The Office of Court Administration has asked for public comment on another proposed change to the rules of the Commercial Division.

The proposed new rule would adopt a

Model Compliance Conference Order Form (“CC Form”) for use in the Commercial Division. The new CC Form is intended to track the expanded Model Preliminary Conference Order Form (“PC Form”) adopted effective June 2, 2014; it presumes that the parties have completed the PC Form and are returning to court a number of months later to report on their progress concerning discovery. As with the PC Form, the proposed new CC Form is intended to serve as a model form and its implementation would not be mandatory.

E-mail comments to rulecomments@nycourts.gov by November 25, 2014.

No Third-Party Claim Where Plaintiff Made no Claim Against Defendant for Which Third Party Defendant Could be Liable

On September 25, 2014, the First Department issued a decision in Fidelity National Title Insurance Co. v. Altshuler Shaham Provident Funds Ltd., 2014 NY Slip Op. 06371, dismissing a third-party claim for legal malpractice.

In Fidelity National Title Insurance, the First Department reversed the trial court’s denial of a motion to dismiss a legal malpractice third-party claim based on counsel’s failure to obtain title insurance, explaining:

[The plaintiff] issued a policy to [defendant] Altshuler [and sought . . . ] a declaration that it properly denied coverage to defendant Altshuler. . . . Altshuler asserts that [the third-party defendant law firm] committed legal malpractice by failing to, among other things, obtain adequate title insurance. The amended third-party complaint should have been dismissed for failure to state a cause of action . . . because [the plaintiff] did not make a claim against Altshuler for which [the third-party defendant] is or may be liable.

(Internal quotations and citations omitted) (emphasis added).