THE RULES OF THE COMMERCIAL DIVISION – AN OVERVIEW OF CHANGES THROUGHOUT THE LAST DECADE, PART 1

By: Hon. Ira B. Warshawsky, J.S.C. (Rtd.)
November, 2016

The Rules of the Commercial Division of the Supreme Court were first formally created as of January 17, 2006. The earliest amendments enacted in 2007, 2009 and 2010 concerned the monetary threshold amounts. In July 2010, a change was made to Rule 1, specifically Rule 1 (b) requiring a lawyer's familiarity with its clients technological systems. Thus, the Commercial Division formally recognized the world of ESI. The amendment stated it was “[c]onsistent with the requirements of Rule 8(b)” and continued that “counsel for all parties who appear at the preliminary conference shall be sufficiently versed in matters relating to their clients technological systems to discuss competently all issues relating to electronic discovery.” This is also consistent with the amendment to the ABA Model Rules, most specifically Comment 6 to Rule 1.1 which added “including the benefits and risks associated with relevant technology” to the “Maintaining Competence” Comment (August 2012).

The procedure regarding the request for Judicial Intervention (RJI) was modified in May 2011 allowing a party to attach to his/her RJI request, a Commercial Division Addendum. This addendum is intended to set forth why the matter should be assigned to a Commercial Division Part. From a 30,000 foot view, these changes were really quite mundane. However, three years ago amendments became far more substantial and frequent. The first source of these changes was the report by the Task Force on Commercial Litigation in the 21st Century, issued in June 2012. Chief Judge Jonathan Lippman had appointed this task force earlier in the year. The second source of the changes would be directly related to the creation of the Commercial Division Advisory Council by Judge Lippman in 2013. The Council's goals were: a) to make more efficient and cost effective the adjudication of commercial disputes in the New York State commercial division; and (b) to burnish the division's reputation as the premier forum in the United States for the resolution of the most complex business disputes.

Before the ink was even dry on Judge Lippman's order creating the Advisory Council, there was a new Rule 8 (b) making a Meet and Confer on ESI issues mandatory and quite broad, before the preliminary conference, and a dramatically new rule on expert witnesses (Rule 13) mirroring to a great degree the Federal Rules. A Meet and Confer on miscellaneous other issues was required pursuant to an amendment of Rule 8 (a) effective as of September 2, 2014.

Since April, 2014, there have been seventeen amendments to the rules and only a few of these relate to monetary thresholds. The amendments include the following:

Rule 9-Accelerated Adjudication Actions (Added April, 2014) Allows a judge to fast-track a case, with the consent of the parties, into a nine-month time frame. To avail oneself of this process, the party must relinquish a great deal including: waving a jury trial, punitive or exemplary damages, objections to personal jurisdiction or forum non conveniens, and the right to any interlocutory appeal. The party must consent to limited discovery (7 interrogatories, 5 request to admit), as well as specific, narrowly tailored parameters on discovery with a direction that proportionality be considered (Rule 9 (d)(iii)).

Rule 11-a, Interrogatories (effective April, 2014) – limited interrogatories to 25, including subparts.

Rule 34, Staggered Court Appearances (Added August and effective September, 2014) Though not exactly rocket science or something akin to the invention of the wheel, Rule 34 was created in August, 2014, and effective September 2014, requiring staggered court appearances (timeslots) for the argument of motions. As a tangent to the rule, it also required that counsel exchange email addresses at the beginning of the case to facilitate communication concerning said oral argument in case the court system fails to notify the parties (that is, they should notify each other).

Rule 11-c, Discovery of Electronically Stored Information from Nonparties (effective, September, 2014) An issue that almost always causes a problem in commercial cases is that of nonparty discovery. The new rule relies on the Guidelines for Discovery of Electronically Stored Information (ESI) found in Appendix A to the rules. The Guidelines itself is an excellent document and well worth the read, whether you have a problem with nonparty discovery or not.

The Guidelines try to take into account a wide spectrum of problems that a litigator might encounter in dealing with both party and non-party e-discovery. It provides factors to be considered, the avoidance of litigation, and even makes reference to advanced analytics software applications (sometimes called technology assisted review or predictive coding) and urges the parties to avail themselves of the court's assistance or mediation to settle their differences. Appendix A is found right after Rule 34, Staggered Court Appearances in the online version of the rules.

Significant rule changes were made effective April, 2015 involving depositions (Rule 11, 11-d and Rule 8).

Rule 11-d Limitations on Depositions limits a party to 10 depositions each, and each deposition may not be longer than 7 hours. This new rule raised the hackles of many litigators who did not want the OCA telling them how to try their case. As many a litigator has said during trial when a judge starts to ask questions, “Judge I don't mind if you try my case for me but just don't lose it.” However the change in the rules does leave open many backdoor modifications of the number of depositions. For example, the parties may stipulate otherwise.

Rule 8, Consultation Prior to Preliminary and Compliance Conferences – This section was amended December 2014 and Effective April, 2015, to add a subparagraph xii, which would require a consultation if there was a need to vary the number or length of depositions vis-$-vis Rule 11-d. Interestingly enough, Rule 11-c was amended at the same time Rule 11-d was created directing the court to allow prospectively altering the presumptive limitations on depositions set forth in 11-d.

Preamble (effective April 1, 2015) to the rules is found in section 202.70 (g). It appears after the areas that set forth the monetary thresholds (22 NYCRR 202.70 (a)) for entry into the commercial division in the different counties across the state and after the definition of what a commercial case is or is not, which are set forth in great detail (22 NYCRR 202.70 (b)). It was written, or rewritten, effective April 1, 2015 and it is not to be ignored. It sets forth what might be called the philosophy of the Commercial Division. Most of us don't read preambles, however, this one should not be skipped. It makes clear that there will be no tolerance for “dilatory tactics”, failures to appear at hearings or depositions, undue delay in discovery or any other act that causes an adversary unnecessary costs.

It reminds the litigator to review the rules regarding sanctions including Rule 12 (failure to appear at a conference), 13(a) adherence to discovery schedules and Rule 24 (d) appearing counsel must be familiar with the case. Of course one is also reminded that all avenues of sanctions found in CPLR 3126 and part 130 of The Rules of the Chief Administrator of the Courts are at the judge's disposal. The message is clear and should not be disregarded. It is obvious the Advisory Council is working hard to enable the Commercial Division to process cases in a timely fashion. It is still, however, up to the commercial division judge to enforce the rules.

Rule 11-e, Responses and Objections to Document Requests (effective April 1, 2015) The administration takes aim at the annoying practice of some counsel who propound worthless responses or objections to document demands. Under Rule 11-e, you are given two choices in making a response:

“11-e (a) (i) state the production will be made as requested; or (ii) state with reasonable particularity the grounds for any objection to production.”

The details of how you should accomplish the above are provided in Rule 11-e (b-d).

If you intend to practice in the Commercial Division of the New York State Courts, this is how you must play the game. Old-style litigation discovery practice will not fly in the Commercial Division. Thus, if you cannot change your style, stay out of the Commercial Division.

Rule 14, Disclosure Disputes (effective April 1, 2015) Acknowledges that Part rules still govern discovery in a pending case. It is only if Part Rules are silent on an issue that Rule 14 kicks into gear. Clearly, there must have been feedback from the judges that wanted, and would continue, to run their part their way and administration (expletive adjectives deleted) were not going to tell them how to run their part. Now, the writer wasn't there for such a discussion, but having spent 10 years in the commercial division, I would imagine that is how it transpired.

The format that went into effect was created to avoid the annoying discovery motions that take up so much of a Commercial Division judge's time. Now, if a discovery dispute cannot be resolved by court conference, the moving party writes a three-page letter setting forth the issues and also noting that one has consulted with the adversary in good faith to resolve the issues. If you have failed to so consult with the adversary, one should explain in a three-page letter why they had good cause not to do so. Four days after sending the letter, your adversary is expected to respond in similar fashion. This is followed by a conference (telephonic or otherwise) with the court, or its law clerk, and hopefully a resolution is reached. This process may sound a little complex, but from the judges view, it is a timesaver compared to having to handle the motion practice on numerous issues concerning minutiae that could easily add 3 to 6 months to the length of any case.

Failure to follow Rule 14 can be problematic. Many years ago there was a similar rule. One particular counsel ignored the rule and made his motion. Counsel argued that the CPLR controls and not the rules created by an administrative body. The judge denied the motion based solely upon the failure to follow the rule. The First Department soundly reversed.

However, you should remember that a Judge controls his or her own calendar and as Rule 14 now states:

“The failure of counsel to comply with this rule [by making a motion] may result in a motion being held in abeyance until the court has an opportunity to conference a matter. If the parties need to make a record, they will still have the opportunity to submit a formal motion.”

For those of you who have a problem with translating the above into the English language, let me assist. The message to counsel should be clear: if you disobey the rules you may find your motion adjourned for a lengthy period of time, a very lengthy period of time!

There is the story of an attorney who made a summary judgment motion (not a discovery motion) in a commercial part after the court had told him that there was still open discovery and the motion should not be made. Why waste the time of the court and that of your adversaries? Despite the warning, the motion was still made (at the client's insistence). The court adjourned the motion for 10 months. Ironically, even after 10 months the parties had still not completed discovery and further adjournments were required, at the parties request, to complete discovery before the motion was ripe for adjudication.

The growing trend to consider “proportionality” in discovery was recognized by an amendment to the Preamble, effective December 1, 2015, by adding the phrase “encourage proportionality in discovery” to the list of concerns of the Commercial Division.

The changes to the rules do not stop in December 2015 but space limitation does prevent me from addressing them at this time. In next month's Nassau Lawyer, The Rules of the Commercial Division – An Overview of Changes Throughout the Last Decade, Part 2, those changes will be addressed, along with any new developments that may have occurred.

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Hon. Ira B. Warshawsky, is a retired Justice of the Supreme Court, Nassau County, Commercial Division. He is a member of NAM's (National Arbitration and Mediation) Hearing Officer Panel and is available nationwide for arbitrations and mediations. For the third year, he was voted a Top Ten Arbitrator in the 2016 New York Law Journal Reader Rankings Annual Survey, and was also named a National Law Journal 2016 Alternative Dispute Resolution Champion, as part of a select group of only 48 nationwide. Judge Warshawsky is Of Counsel to Meyer, Suozzi, English & Klein, P.C., in Garden City, NY.

Click here to view Hon. Ira Warshawksy's resume

For any questions or comments, please contact Jacqueline I. Silvey, Esq. / NAM General Counsel, via email at jsilvey@namadr.com or direct dial telephone at 516-941-3228.

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(i) – The rules may be found online: http://www.nycourts.gov/rules/trialcourts/202.shtml#70.

(ii) – (See The Rules Have Changed – Should You Be Concerned? NYLJ 2014) (both amendments were in September 2013). Many changes are due to the feedback that the Council has received from the judges themselves and from litigators who regularly practice in the commercial division parts.

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Reprinted with permission by the Nassau County Bar Association