The four Departments of the Appellate Division recently completed a super-sized quarter, issuing a big gulp of weighty decisions to litigants and counsel thirsty for guidance where the law is fluid.
Bubbling at the top of the tank, of course, was the First Department’s 29-page opus setting aside New York City’s ban on large, sugary soft drinks. Additionally, the state’s intermediate appellate courts advanced the law in a broad range of other areas, including civil procedure, shareholders’ derivative claims, sentencing, and Workers’ Compensation. Some thirst-quenching highlights follow.
Health Law. New Yorkers remain free to order sugary soft drinks in portions larger than 16 ounces after the First Department struck down New York City’s large-soda ban in Matter of New York Statewide Coalition of Hispanic Chambers of Commerce v. New York City Dept. of Health & Mental Hygiene.1 The appellate panel unanimously held that the Board of Health’s “portion cap” rule exceeded its lawfully delegated authority and violated the principle of separation of powers.
The portion cap prohibited restaurants, movie theatres and other food service establishments from selling sugary beverages in containers larger than 16 ounces. Bypassing the City Council, the Board of Health promulgated and enacted the rule unilaterally “to protect New Yorkers from the obesity epidemic.”
Writing for the court, Justice Dianne Renwick observed that an administrative agency like the Board of Health, as an arm of the executive branch, “may only effect policy mandated by statute and cannot exercise sweeping power to create whatever rule they deem necessary.”
Focusing on the portion cap rule’s inclusion of numerous exceptions, Renwick found that the rule was a “compromise measure” that set policy rather than implementing a statute. For example, supermarkets, convenience stores and bodegas were exempted, and consumers could still order two 16-ounce servings at once. “[T]he Board did not fill a gap in an existing regulatory scheme,” Renwick concluded, “but instead wrote on a clean slate.”
The Court of Appeals this week granted the Bloomberg administration’s motion for leave to appeal.
Attorney Fees. Only in America can a lawyer commence a derivative suit before a corporate decision is made and, after the corporation’s board votes, dismiss the lawsuit and apply for attorney fees because the corporation must have changed its behavior in response to the lawsuit. Now, the First Department is putting an end to that gambit. In Central Laborers’ Pension Fund v. Blankfein,2 the appellate court barred a derivative plaintiff’s counsel from recovering attorney fees when a pre-suit demand on the board was neither made nor excused. Fees are not recoverable in those circumstances even if the litigation brings about the plaintiffs’ desired outcome and substantially benefits the corporation.
In Central Laborers, the plaintiff shareholders sued Goldman Sachs Group in December 2009, alleging that Goldman’s yet-to-be-announced compensation for 2009 would be excessive in light of the 2008 financial meltdown. One month later, Goldman announced that its compensation for 2009 would be lower than 2008 when compared to net revenues. The plaintiffs then moved to dismiss their case and sought attorney fees, taking credit for the reduction and asserting that Goldman’s announcement had “essentially conceded the merits of Plaintiffs’ claims.”
The plaintiffs, however, had sued without making the demand on the board required by the Business Corporation Law.3 In a unanimous decision authored by Justice David Friedman, the First Department construed the pre-suit demand requirement as a prerequisite for recovering fees. “To award fees to a derivative plaintiff who has neither made a demand nor alleged demand futility…would reward that plaintiff for unjustifiably wresting the management of the corporation from those to whom it is entrusted by law and by the rest of the shareholders,” the court explained.
Witnesses. A 15-year-old victim traumatized by sexual abuse at the hands of her father could have a therapeutic comfort dog by her side when she testified against him, the Second Department ruled unanimously in People v. Tohom,4 a case of first impression in New York.
The victim, J, was abused by her father between the ages of 11 and 15. J’s therapist found that the presence of Rose, a therapy dog, calmed J and helped her express herself.
Justice Sandra L. Sgroi found support for Rose in New York’s law on the fair treatment of child victims as witnesses.5 That statute requires judges to “be sensitive to the psychological and emotional stress a child witness may undergo when testifying.” Sgroi viewed that provision as a “catch-all” which afforded the trial court “flexibility to adopt or permit additional accommodations, other than those specifically mentioned” in the statute.
Although Rose “may have engendered some sympathy for J in the minds of the jurors,” the Second Department saw no ground for overturning the judgment. The jurors had been instructed to disregard Rose’s presence; the dog was “in no way obtrusive” during J’s testimony; J was cross-examined at length without reference to the dog; and the presence of a support dog “can be considered less prejudicial than allowing ‘support persons,’” which the statute expressly permits.
Indeed, in the Second Department’s view, courts possess “inherent power and discretion” to order such accommodations.
Contracts. Think twice before firing off that hastily drafted, ungrammatical email composed on your phone: it may be a binding settlement.
Reinforcing the legal effect of electronic communications, the Second Department in Forcelli v. Gelco6 upheld a settlement agreement even though it had been documented solely in an email.
The four-sentence email in question confirmed the oral settlement of a tort case. A week later, however, Supreme Court granted the defendants’ summary judgment motion and dismissed the action. Attempting to back out of the settlement, the defendants argued that the email failed to comply with the requirement that settlements be embodied in “a writing subscribed” by the party or its attorney.7 In another unanimous decision by Sgroi, the Second Department held that counsel’s email did the job.
Email messages “cannot be signed in the traditional sense.” Still, “given the now widespread use of email,” it would be “unreasonable” to interpret the law as requiring a physical signature, the court wrote. Moreover, defendants’ counsel had typed “Thanks” at the email’s conclusion, followed by her name. That personal touch “indicate[d] that the author purposefully added her name to this particular email message” rather than inserting it automatically. As a result, the email “may be deemed a subscribed writing” under the statute and was enforceable.
Civil Procedure. Acknowledging “confusion” in the law over whether a non-moving party seeking affirmative relief must cross-move, the Second Department held in Fried v. Jacob Holding8 that courts have discretion to grant a party’s request for affirmative relief in response to a motion, even though the requesting party failed to cross-move.
In Fried, after the defendant failed to answer the complaint, the plaintiff sought a default judgment. Opposing the motion, the defendant showed that “the default was not willful, the period of delay was very short, and there was no prejudice to the plaintiffs resulting from it.” The defendant, however, did not formally cross-move for leave to serve a late answer. Rather, the defendant’s papers “request[ed]” that the court compel the plaintiffs to accept service of the answer.
Justice Ruth Balkin clarified the law in the Second Department: If a litigant wishes to require a decision on the merits, the litigant must notice a cross-motion. Without a cross-motion, the non-moving party may request affirmative relief as a discretionary matter and “hope that the court opts, in the exercise of its discretion, to entertain the request.”
Sentencing. Recognizing the broad remedial objectives of the Drug Law Reform Act of 2009, the Third Department in People v. Coleman9 ruled that defendants’ eligibility to apply for resentencing depends on the underlying offenses and not the sentences they received. Under the statute, some persons convicted of a class B felony offense may apply for re-sentencing.10 The statute, however, excludes a person “serving a sentence on a conviction for or [who] has a predicate felony conviction for an exclusion offense.” An “exclusion offense” includes any crime “for which a merit time allowance is not available.”
Earl Coleman was convicted of selling drugs and received a sentence of 15 years to life as a “persistent felony offender.” Merit time was not available for that sentence. Still, the Third Department found the defendant eligible for resentencing.
Writing for a 4-1 majority and disagreeing with precedent from the Second Department,11 Presiding Justice Karen K. Peters explained that although Coleman was “serving a sentence that would preclude him from earning merit time,” he was not “convicted of an offense for which a merit time allowance is not available.” Stating that “defendant’s offense and his sentence are…two separate components,” the court declined to “conflate” the concepts to deprive an otherwise eligible person of the benefits of sentencing reform.
Workers’ Compensation. New York revamped the Workers’ Compensation Law in 2007, among other things directing the Workers’ Compensation Board to issue a list of pre-authorized medical procedures that would automatically be covered.12 But, what happens if your procedure varies from the ones on the list? After being denied compensation for extra acupuncture treatments, Maureen Kigin took the board to court and found out the answer in Kigin v. State of New York.13
Writing for the Third Department in a 4-1 decision, Justice Edward O. Spain explained that the list “preordain[s] that the listed medical care is medically necessary for the conditions indicated,” which by implication means that “those not included are not medically necessary.” To obtain reimbursement for care that is not preapproved, a doctor must “make a threshold showing of medical necessity” by applying for a variance and “overcom[ing] the predetermination of no medical necessity for…care that falls outside of the Guidelines.”
Kigin’s challenges to the pre-approval regulations were rejected one by one. The Third Department found that “the Legislature expressly delegated to the Board the authority and obligation to promulgate the regulations (and incorporated Guidelines containing the list of pre-authorized procedures),” and “the Legislature’s delegation of this authority to the Board was lawful.”
Malpractice. It must be depressing to be a victim of medical malpractice and then have your lawyers commit legal malpractice by suing the wrong party. To have your legal malpractice claim then dismissed because you didn’t appeal the dismissal of the medical case would be salt in the wound.
Assisting the twice-injured plaintiff in Grace v. Law, a 4-1 majority of the Fourth Department rejected any “per se rule that a party who voluntarily discontinues an underlying action and foregoes an appeal thereby abandons his or her right to pursue a claim for legal malpractice.”14 Addressing an issue of first impression in New York, the court explained that requiring plaintiffs to preserve the legal malpractice action by litigating the underlying case “would force parties to prosecute potentially meritless appeals to their judicial conclusion…thereby increasing the costs of litigation and overburdening the court system.”
Indeed, the court’s unsigned memorandum and order observed that “[t]he additional time spent to pursue an unlikely appellate remedy could also result in expiration of the statute of limitations on the legal malpractice claim.”
E. Leo Milonas is a litigation partner at Pillsbury Winthrop Shaw Pittman. He is a former associate justice of the Appellate Division, First Department, and the former chief administrative judge of the State of New York. Frederick A. Brodie is a litigation partner in Pillsbury’s New York office. Pillsbury litigation associates Tamara Zakim, Aubrey Charette and Tameka M. Beckford-Young assisted in preparing this column.
1. 2013 N.Y. Slip Op. 05505 (1st Dept. July 30, 2013).
2. 2013 N.Y. Slip Op. 05857 (1st Dept. Sept. 17, 2013).
3. N.Y. B.C.L. §626(c).
4. 2013 N.Y. Slip Op. 05234 (2d Dept. July 10, 2013).
5. Executive Law §642-a.
6. 2013 N.Y. Slip Op. 05437 (2d Dept. July 24, 2013).
7. CPLR Rule 2104.
8. 2013 N.Y. Slip Op. 05555 (2d Dept. Aug. 7, 2013).
9. 2013 N.Y. Slip Op. 05545 (3d Dept. Aug. 1, 2013).
10. CPL §440.46.
11. See People v. Gregory, 80 A.D.3d 624 (2d Dept. 2011).
12. L. 2007, ch. 6; Workers’ Comp. L. §13-a(5).
13. 2013 N.Y. Slip Op. 05360 (3d Dept. July 18, 2013).
14. 2013 N.Y. Slip Op. 05383 (4th Dept. July 19, 2013).