We Are All Commercial Litigators Now: NY Commercial Division Rules Become Agents Of Change

Financial Services Law


By Andrew L. Morrison, Partner, Manatt Financial Services | Anthony J. Staltari, Managing Attorney, Manatt

From their creation in 1993, the New York State Supreme Court Commercial Division Rules have been developed and refined by judges and practitioners to pursue the twin goals of cost containment and fair adjudication. Accordingly, the Commercial Division has become an efficient and effective tribunal that is highly sought after to adjudicate complex civil business disputes.

In fact, Chief Administrative Judge Lawrence Marks states that “through the work of the Commercial Division Advisory Council—a committee of commercial practitioners, corporate in-house counsel and jurists devoted to the Division’s excellence—the Commercial Division has functioned as an incubator, becoming a recognized leader in court system innovation, and demonstrating an unparalleled creativity and flexibility in development of rules and practices.” See Administrative Order AO/270/2020 (AO/270/2020).

This proven success is about to roll out widely to the other trial courts in New York. Judge Marks issued AO/270/2020, effective February 1, 2021, which amends the Uniform Civil Rules for the Supreme Court and the County Courts (the Uniform Rules) to incorporate, either in whole or in part, 29 current Commercial Division Rules.

To the extent that the Commercial Division Rules were based on federal court practice, this development represents the continued alignment of state and federal litigation practice. With their emphasis on efficient procedure designed to make predictable the costs of litigation, the new changes to the Uniform Rules should introduce the benefits of practicing in the Commercial Division to those matters that do not qualify for adjudication in the Commercial Division.

Here Are 12 Interesting New Developments

1. New Uniform Rule 202.23 Staggered Court Appearances

New Uniform Rule 202.23 adopts Commercial Division Rule 34 and calls for “[s]taggered court appearances…for oral argument on a motion…assigned either a set time or a time interval during which the appearance is expected to be held” and “for the court to be able to address any and all matters of concern to the court.”

Allowing the court to schedule arguments and/or conferences for each case at a specific time should drastically reduce counsels’ waiting time and result in more efficient and less costly court appearances. This is a change that every practitioner will appreciate after the doors to the courthouse physically reopen.

2. New Uniform Rule 202.20-i Direct Testimony by Affidavit

New Uniform Rule 202.20-i adopts Commercial Division Rule 32-a, which allows for the offering of direct testimony by affidavit in a nonjury trial or evidentiary hearing.

A party wishing to offer direct testimony in an affidavit may do so:

provided, however, (a) that the court may not require the submission of a direct testimony affidavit from a witness who is not under the control of the party offering the testimony and (b) the opposing party shall have the right to object to statements in the direct testimony affidavit and the court shall rule on such objections, just as if the statements had been made orally in open court. Where an objection to a portion of a direct testimony affidavit is sustained, the court may direct that such portion be stricken.

Further, “[t]he submission of direct testimony in affidavit form shall not affect any right to
conduct cross-examination or re-direct examination of the witness.”

This new rule will greatly reduce the duration of a trial or evidentiary hearing. Given the obstacles to live witness testimony during the pandemic, the ability to present direct testimony by affidavit will become immediately relevant and used by practitioners.

3. New Uniform Rule 202.8-g Motions for Summary Judgment: Statements of Material Facts

New Uniform Rule 202.8-g adopts Commercial Division Rule 19-a governing required submissions on a motion for summary judgment.

A party seeking summary judgment must submit “a short and concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried.” The opponent of the motion must then submit “a correspondingly numbered paragraph responding to each numbered paragraph in the statement of the moving party, and if necessary, additional paragraphs containing a separate short and concise statement of the material facts as to which it is contended that there exists a genuine issue to be tried.” And “each numbered paragraph in the statement of material facts…will be deemed admitted unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party.”

This will represent a major change for cases pending in non-Commercial Division courts. This new rule is taken from what is now conventional procedure in federal practice.1 The submission of uncontested facts and a corresponding submission of contested facts in connection with a motion for summary judgment should allow the presiding judge to more quickly analyze whether there are triable issues of material facts precluding summary disposition.

4. New Uniform Civil Rules Section 202.8-e Temporary Restraining Orders

New Uniform Civil Rules Section 202.8-e adopts Commercial Division Rule 20’s mandate that a temporary restraining order will no longer be granted . Specifically, 202.8-e states:

Unless excused by the court, the applicant must give notice of the time, date and place that the application will be made in a manner, and provide copies of all supporting papers, to the opposing parties sufficiently in advance to permit them an opportunity to appear and contest the application. Any application for temporary injunctive relief, including but not limited to a motion for a stay or a temporary restraining order, shall contain, in addition to the other information required by this section, an affirmation demonstrating either that: (a) notice has been given; or (b) notice could not be given despite a good faith effort to provide it[;] or (c) there will be significant prejudice to the party seeking the restraining order by giving of notice.

Accordingly, before the court will hear an application for a provisional remedy, practitioners in a non-Commercial Division case will now need to provide advance notice to the opposing party and also provide the opposing party with copies of all supporting papers to allow the opposing party to submit opposition. The effective elimination of an ex parte order outside the Commercial Division is consistent with federal practice, which insists on notice and an opportunity to respond to orders to show cause.2

5. New Uniform Rule 202.8-b Length of Papers

New Uniform Rule 202.8-b follows Commercial Division Rule 17’s restrictions on the length of motion papers. Specifically, “[u]nless otherwise permitted by the court: (i) affidavits, affirmations, briefs and memoranda of law in chief shall be limited to 7,000 words each; [and] (ii) reply affidavits, affirmations, and memoranda shall be no more than 4,200 words and shall not contain any arguments that do not respond or relate to those made in the memoranda in chief.” The caption, table of contents, table of authorities and signature block are to be excluded from the word count.

This means that the long-standing page limits of 25-30 pages in the general parts will no longer apply. By focusing on word count, the new rules will ensure predictability and consistency and prevent abusive gamesmanship regarding margins, font size and footnotes. The rules require an attorney to certify the word count in each submission. Practitioners familiar with appellate practice will find this similar to Fed.R.App.Pro. 32(a)(7)(B)(i).

6. New Uniform Rule 202.20-b Limitations on Depositions

New Uniform Rule 202.20-b incorporates Commercial Division Rule 11-d’s mandate to limit depositions. Specifically, it imposes two significant limitations: “Unless otherwise stipulated to by the parties or ordered by the court: (1) the number of depositions taken by plaintiffs, or by defendants, or by third-party defendants, shall be limited to 10; and (2) depositions shall be limited to 7 hours per deponent.”

This represents a further alignment with federal practice.3 These limitations have worked well in federal court, and in the Commercial Division, to prevent discovery abuse and force litigants to be strategic and efficient with depositions. Importantly, these limitations may be modified by stipulation and also by court order upon good cause being shown.

7. New Uniform Rule 202.20 Interrogatories

New Uniform Rule 202.20 borrows in part from Commercial Division Rule 11-a, which limits interrogatories “to 25 in number, including subparts, unless the court orders otherwise. This limit applies to consolidated actions as well.”

This new rule also originates in federal practice.4 Although this new limitation does not directly apply to requests for a bill of particulars, practitioners should consider the effect on such requests. Commercial Division judges have cited Rule 11-a as a reason to similarly limit requests for bills of particulars, and general part justices may be similarly inclined.5

8. New Uniform Rule 202.20-a Privilege Logs

New Uniform Rule 202.20-a adopts Commercial Division Rule 11-b’s requirement that the parties meet and confer regarding privilege logs, and that such discussion include consideration of categorical privilege logs.

Practitioners should note that although Rule 202.20-a does not expressly adopt Rule 11-b’s stated preference for categorical privilege logs, one can expect categorical logs to become more widely used.

9. New Uniform Rule 202.23 Consultation Prior to Preliminary and Compliance Conference

New Uniform Rule 202.23 follows Commercial Division Rule 8’s mandate that “[c]ounsel for all parties shall consult prior to a preliminary or compliance conference about (i) resolution of the case, in whole or in part; (ii) discovery, including discovery of electronically stored information, and any other issues to be discussed at the conference[;] (iii) the use of alternate dispute resolution to resolve all or some issues in the litigation; and (iv) any voluntary and informal exchange of information that the parties agree would help aid early settlement of the case. Counsel shall make a good faith effort to reach agreement on these matters in advance of the conference.”

The emphasis on early resolution of cases is now not limited solely to Commercial Division cases. Counsel will have to meet to discuss how to resolve their dispute, including informal exchange of information and alternative dispute resolution. Once again, this rule is consistent with federal practice that has, for years, required parties to meet and confer early to discuss resolution and/or alternative dispute resolution and to exchange initial disclosures prior to any formal discovery demands.6

10. Uniform Rule 202.5(a)(2) Electronic Bookmarking of Briefs, Affirmations and Affidavits

New Uniform Rule 202.5(a)(2) borrows from Commercial Division Rule 6’s requirement that “[e]ach electronically-submitted memorandum of law, affidavit and affirmation exceeding 4500 words, shall include bookmarks providing a listing of the document’s contents and facilitating easy navigation by the reader within the document.”

This requirement, applicable to all briefs, affidavits and affirmations exceeding 4,500 words that are electronically filed with the court, will allow easy navigation by the reader within the document itself. This will allow for a court to dispose of motions more quickly and efficiently.

11. New Uniform Rule 202.20-e Strict Adherence to Discovery Schedule

New Uniform Rule 202.20-e(a) adopts Commercial Division Rule 13’s mandate that the “[p]arties shall strictly comply with discovery obligations by the dates set forth in all case scheduling orders. Applications for extension of a discovery deadline shall be made as soon as practicable and prior to the expiration of such deadline. Non-compliance with such an order may result in the imposition of an appropriate sanction against that party pursuant to CPLR [Civil Practice Law and Rules] 3126.”

This gives teeth to the discovery schedule agreed upon by the parties and will discourage counsel from merely selecting placeholder dates.

Additionally, practitioners should be mindful of new subsection (b), which states, “If a party seeks documents from an adverse party as a condition precedent to a deposition of such party and the documents are not produced by the date fixed, the party seeking disclosure may ask the court to preclude the non-producing party from introducing such demanded documents at trial.”

12. Uniform Rule 202.1(f), (g) Appearance by Counsel with Knowledge and Authority

Revised Uniform Rule 202.1 incorporates Commercial Division Rule 1’s requirement that “[c]ounsel who appear before court must be familiar with the case with regard to which they appear and be fully prepared and authorized to discuss and resolve the issues which are scheduled to be the subject of the appearance.”

Now, counsel appearing at any conference should be prepared and authorized to resolve the subject of the appearance at the risk of being in default. This should make all conferences meaningful, and practitioners will not be able to get away with sending someone who is not familiar with the case or subject matter of the conference to cover an appearance.

Takeaways

In the middle of a raging pandemic that has greatly impacted civil practice in New York, the Civil Trial Parts of the New York Supreme Court (and the County Courts) will receive a greatly needed vaccine of Commercial Division antibodies designed to streamline civil practice, curb abuse, and make litigation more cost-effective and predictable. This represents a major and comprehensive change in all phases of litigation (without amending the CPLR) based on practices that have proven effective at both the state and federal levels.

Although it was natural for the Commercial Division to emulate and adopt those aspects of federal practice that promote efficiency and early resolution while curbing abusive reliance on running up the cost of a litigation (in terms of both treasure and time) to leverage a settlement, it is quite breathtaking to witness the scope of federal practice that will now permeate all the trial courts in New York. Litigators who are accustomed to the inherent delay and cost baked into a state court system (outside the Commercial Division) that is overwhelmed with cases and strapped for judges, judicial hearing officers and other essential courthouse personnel will be surprised to see how rapidly these new rules will promote cost savings and speed without sacrificing a fair adjudication.

Every new rule is geared to prevent unnecessary delay and cost—from eliminating counsel sitting in a packed courtroom all morning to wade through cattle-call motion calendars to reining in blunderbuss interrogatories and unlimited depositions to enforcing a strict word limit for submissions. Additionally, the non-Commercial Division parts will join the trend toward emphasis on early resolution of disputes. The wide rollout of the lessons learned and efficiencies earned in the miraculous incubator that is the Commercial Division is a welcome development indeed.

1 See Local Rule 56.1 of the Northern District of New York, Local Rule 56.1 of the Southern and Eastern Districts of New York, and Western District of New York 56.

2 Fed.R.Civ.P. 65(b) allows for the issuance of a temporary restraining order without notice to one’s adversary only upon an affidavit or verified complaint showing “that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition” and “the movant’s attorney certifies in writing any efforts made to give notice and the reasons why it should not be required.” Likewise, many judges in the Southern District of New York require the moving party to provide evidence of advance notice.

3 See Fed.R.Civ.P. 30(a)(2)(A)(1).

4 See Fed.R.Civ.P. 33(a)(1).

5 See Orentreich v. John B. Murray Architect, LLC, 2020 NY Slip Op. 32944(U) (NY County Index No. 650207/2019).

6 See Fed.R.Civ.P. 16, 26(a)(1)(A) and 26(f).

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