This article first appeared in New York Law Journal March 1, 2007 Appellate Division Review by E. Leo Milonas and Frederick A. Brodie Litigation The Honorable E. Leo Milonas +1.212.858.1615 eleo.milonas@pillsburylaw.com Frederick A. Brodie +1.212.858.1628 fab@pillsburylaw.com Andrew C. Smith, Dennis J. Callahan and Jeffrey Gavenman, litigation associates at Pillsbury Winthrop Shaw Pittman LLP, assisted in preparing this article. A judge is a law student who marks his own papers. H.L. Mencken Some of the leading cases decided during the past three months by New York s intermediate appellate courts are summarized below: you may grade the results yourself. First Department Limited Liability Companies. A member of a limited liability company (LLC) has standing to bring a derivative suit even though the LLC Law does not specifically grant such a right, the First Department held in Tzolis v. Wolff. 1 Disagreeing with a contrary decision of the Second Department, 2 the unanimous opinion authored by Justice George D. Marlow pointed to judicial recognition of the common-law right to sue derivatively on behalf of a corporation or a limited partnership; the principle of statutory construction requiring a clear and specific legislative intent to override the common law; and the fact that most states provide a statutory right to bring such claims. Because a limited liability company structure blends key aspects of both the partnership and corporate forms, sharing similar characteristics of each, the First Department concluded, there is no reason to deprive members of [LLCs] of the same important right to bring a derivative action possessed by the members of limited partnerships and corporations. Campaign Finance. Declining to close a loophole in the New York City Campaign Finance Act, the First Department in New York City Campaign Finance Board v. Ortiz 3 ruled that while a candidate and a campaign treasurer are personally liable for civil penalties assessed by the Board, only the campaign committee may be held liable for the return of public matching funds that have been misspent. Reviewing the relevant provisions of the City s Administrative Code, Justice Richard T. Andrias found that the differences in the treatment of the two obligations could not be clearer. The unanimous panel call[ed] to the City Council s attention the apparent loophole and suggest[ed] that if this laudable legislation is intended to have its full desired effect, the issue should be addressed. The court would not, however, supply by implication a provision that, we might reasonably suppose, the City Council intended to omit. 2007 Pillsbury Winthrop Shaw Pittman LLP. All rights reserved. For more information about us, please visit www.pillsburylaw.com
Appellate Division Review... New York has a strong interest in seeing that its aggrieved citizens obtain redress for wrongs committed upon them by other citizens of New York, regardless of where the act took place. Conflict of Laws. Faced with a unique conflict of law issue, the First Department determined that where one New York resident sexually assaults another while on vacation in Brazil, the resulting tort claim was governed by New York law. Writing for a unanimous panel in K.T. v. Dash, 4 Justice David B. Saxe noted that both the plaintiff and the defendant lived and worked in New York. Applying New York s interest analysis framework, the First Department observed that aside from the fact that they were there for a few days while vacationing, the parties essentially have no contacts with Brazil. As a result, the outcome of the litigation will have no impact at all on Brazil or any of its citizens or residents. In contrast, the panel noted, New York has a strong interest in seeing that its aggrieved citizens obtain redress for wrongs committed upon them by other citizens of New York, regardless of where the act took place. Collective Bargaining. A divided panel of the First Department upheld the validity of two local laws affecting the collective bargaining process in Mayor of the City of New York v. Council of the City of New York, 5 rejecting the Mayor s challenges to the enactments. Local Laws 18 and 19 of 2001 6 provided the New York City Fire Department s emergency medical technicians (EMTs) and fire alarm dispatchers (FADs), previously defined as non-uniformed employees, the same authority enjoyed by uniformed personnel to negotiate with the Mayor all terms and conditions of employment. As a result, through their unions, EMTs and FADs would be guaranteed a seat at the negotiating table, and could not be bound by a collective bargaining agreement to which they were not signatories and which resulted from negotiations in which they did not participate. The local laws were enacted over a Mayoral veto. Writing for a 3-2 majority, Justice James M. McGuire rejected a raft of challenges to the local laws validity under the New York Civil Service Law, the Municipal Home Rule Law and the New York City Charter. Second Department Disease Outbreak. In August 2002, a parochial school teacher was diagnosed with active tuberculosis. Two months later, the New York City Department of Health and Mental Hygiene (DOHMH) tested at-risk students and found that 68% of them (45 in total) had contracted the disease. Could the infected students sue the City and DOHMH for failing timely to notify them? No, ruled a unanimous panel of the Second Department in Abraham v. City of New York, 7 a decision authored by Justice Steven W. Fisher. Even if the City and DOHMH were shown, in hindsight, to have exhibited poor judgment in delaying the commencement of testing and prematurely allowing students back into the school, they are protected by governmental immunity. The investigation of a possible tuberculosis outbreak calls for the exercise of discretion and judgment by City and [DOHMH] officials and cannot be characterized as ministerial, the panel explained. Nor did the City or DOHMH establish a special relationship with the students that would support municipal liability. Consequently, the City and DOHMH cannot be held liable for injuries resulting from their official actions in that case. 2
Forged Checks. A bank is strictly liable to its customer when it pays a check on a forged signature. However, under UCC 4-406(4), the bank can avoid liability if it makes statements of the account and the allegedly forged items available to the customer, and the customer fails to report the alleged forgery to the bank within one year. Departing from a line of cases stating that such a report must be written, the Second Department in Robinson Motor Xpress, Inc. v. HSBC Bank, USA, 8 held that an oral report could fulfill the customer s responsibilities under UCC 4-406(4). Reviewing the various decisions that had referred to a written notice requirement under the statute, the Second Department concluded that the form of notice was not in issue in those decisions, and thus the references to a written report were dicta that need not be followed. Allowing oral notice, Justice Robert A. Spolzino wrote for the unanimous panel, is consistent with both the language of the statute and UCC jurisprudence generally. Third Department State Pensions. When a retired member of the New York State and Local Employees Retirement System returns to public service, the member s pension benefits are suspended until he or she again retires. An exception applies, however, if the retiree returns to an elective office that he or she did not hold prior to retirement. In Grella v. Hevesi, 9 the Third Department held that this elective office exception did not apply to a retired prosecutor who was appointed as a Court of Claims Judge and then assigned to Supreme Court, an elective judgeship. Departing from a line of cases stating that such a report must be written, the Second Department in Robinson Motor Xpress, Inc. v. HSBC Bank, USA, held that an oral report could fulfill the customer s responsibilities under UCC 4-406(4). In a unanimous opinion by Justice Edward O. Spain, the Appellate Division reasoned that an appointment and temporary assignment to an elective office does not constitute acceptance of an elective office under Civil Service Law 150, because such an administrative designation could not convert one s status to that of an elective office holder or alter one s classification as an appointee to a nonelective position. Waivers of Appeal. In People v. Edwards, 10 an unsigned memorandum and order, the Third Department provided some practical guidance to judges and prosecutors on implementing plea bargains that involve waivers of the right to appeal. First, it is not sufficient for the trial judge to state simply that [t]his case also includes a waiver of appeal and then say that the defendant will be unable to appeal her sentence. Such a statement is not adequate to ensure that [the] defendant understood that her right to appeal was separate and distinct from the rights she automatically forfeited upon pleading guilty. Second, a written waiver is insufficient if it states only that defendant voluntarily waived her right to appeal, without indicating that the defendant was informed by her counsel of the consequences of doing so. In Edwards, those two defects rendered invalid the defendant s waiver of her right to appeal her sentence for robbery in the second degree. Upon reaching the merits on appeal, however, the Third Department affirmed the sentence. 3
Appellate Division Review Sentencing decisions are committed to the court s discretion and the sentencing recommendations of prosecutors are just that, the Fourth Department reaffirmed in People v. Dowdell. Fourth Department Sentencing. Sentencing decisions are committed to the court s discretion and the sentencing recommendations of prosecutors are just that, the Fourth Department reaffirmed in People v. Dowdell, 11 an unsigned memorandum. The defendant in Dowdell had entered into a plea agreement in which he agreed to cooperate with the District Attorney in exchange for a recommended sentence of less than 5 to 15 years. When the prosecutor did not recommend a sentence less than 5 to 15 years, the trial court indicated that it was bound to impose the sentence of 5 to 15 years. That was error, the Fourth Department pointed out. Because the County Court failed to exercise its discretion in sentencing the defendant, the unanimous panel vacated the sentence and remitted the matter for resentencing. Paternity Testing. There is an internal tension in Family Court Act 516-a(b). The statute limits the grounds for challenging an acknowledgement of paternity more than 60 days after its execution to fraud, duress or mistake, and places the burden of proof on the challenging party. Yet, it also provides that the court shall order DNA tests for the determination of the child s paternity and shall make a finding of paternity, if appropriate upon receiving such a challenge. And, the statute is silent on when the challenger is required to present his evidence to meet that burden. In Demetrius H. v. Mikhaila C.M., 12 an unsigned memorandum, the Fourth Department held that the challenger must meet his burden of proof before he has a right to DNA testing. Absent a showing of fraud, duress or material mistake of fact, ordering DNA testing and thus opening the door to a possible finding contrary to the acknowledgement of paternity would not be appropriate within the meaning of the Family Court Act, the court concluded. Mentally Ill Parents. In Matter of Kahlil S., 13 an unsigned memorandum, the Fourth Department liberalized the law s treatment of parents who are unable to care for their children adequately due to mental illness or mental retardation. Although prior Fourth Department decisions suggested that Family Courts lacked the authority to grant the birthparents post-termination visitation rights in such situations, in Khalil S., the court acknowledged that the termination of the parental rights of a biological parent results in an abrupt and complete cessation of contact between a child and the parent, which may cause psychological harm to the child. Therefore, the Fourth Department held, Family Court may, in those cases in which the court deems it appropriate, exercise its discretion in determining whether some form of post-termination contact with the biological parent is in the best interests of the child. 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 also a litigation partner in Pillsbury s New York office. Both are members of the firm s appellate practice team. 4
Endnotes: 1. 2007 N.Y. Slip Op. 01190 (1st Dept. Feb. 8, 2007). 2. Hoffman v. Unterberg, 9 A.D.3d 386 (2d Dept. 2004). 3. 2006 N.Y. Slip Op. 09532 (1st Dept. Dec. 19, 2006). 4. 2006 N.Y. Slip Op. 09393 (1st Dept. Dec. 14, 2006). 5. 2006 N.Y. Slip Op. 09059 (1st Dept. Dec. 5, 2006). 6. Administrative Code 12-307[a][4][i]. 7. 2007 N.Y. Slip Op. 00463 (2d Dept. Jan. 23, 2007). 8. 2006 N.Y. Slip Op. 09212 (2d Dept. Dec. 5, 2006). 9. 2007 N.Y. Slip Op. 00193 (3d Dept. Jan. 11, 2007). 10. 2007 N.Y. Slip Op. 00699 (3d Dept. Feb. 1, 2007). 11. 2006 N.Y. Slip Op. 09911 (4th Dept. Dec. 22, 2006). 12. 2006 N.Y. Slip Op. 09812 (4th Dept. Dec. 22, 2006). 13. 2006 N.Y. Slip Op. 09742 (4th Dept. Dec. 22, 2006). 5