Last month I wrote of changes to the Commercial Division rules over approximately the past eight years. I will now continue with amendments and additions to the rules from the end of 2015 to present.
Effective December 1, 2015, an amendment to Rule 11-d, and a new section 11-f were added. Rule 11-d, Limitations on Discovery, was previously amended April, 2015, limiting the number and duration of depositions. It was slightly modified by the addition of section 11-d (e).
The powers that be recognized that if you are deposing an entity, you may have to depose more than one person. Now, “the deposition of an entity shall be treated as a single deposition [for the purposes of 11-d (a) (i and ii)] even though more than one person may be designated to testify on the entity’s behalf.” Further, the “durational limit may be enlarged by agreement of the parties or upon application for leave of Court, which shall be freely granted.”
Rule 11-f, Depositions of Entities: Identification of Matters: This new section fits hand in glove with the changes to Rule 11-d. It sets forth, quite comprehensively, the format of the subpoena you serve on entities, as to a particularity of information requested as well as individuals that you wish to depose. It goes rather deeply into the weeds in attempting to address questions that have arisen in this area over the years.
There were also changes in 2016 which are found in the online version, as well as changes that are pending for review.
Rule 3, Alternative Dispute Resolution (ADR) (amended December 1, 2015) includes the right of the parties to stipulate having the case determined by a summary jury trial (subject to local rules concerning summary jury trials). The first sentence in Rule 3 speaks to the appointment of an uncompensated mediator for the purpose of mediating a resolution of all or some of the issues presented in the litigation. This can be done at any time during the litigation. Generally, the use of mediation at any time during litigation should be construed as positive.
Rule 3 was again amended on May 26, 2016 (effective July 2016). The title now includes the statement “Settlement Conference before a Justice Other Than the Justice Assigned to the Case.”
There has been a practice in New York County, and to some degree in other Commercial Division parts, that prior to a case going to non-jury trial, sometimes literally on the eve of trial, the trial judge would send the case to another judge in the Commercial Division for the purposes of negotiating a settlement. This was done completely on a voluntary basis. The purpose was clearly to keep the judge who would be making findings of fact out of the settlement process.
The new rule, which is section (b) of Rule 3, provides that if the attorneys wish to proceed with the settlement conference before a justice other than the justice assigned to the case, they may jointly request such action by the assigned judge. The amendment allows for the request to be made at any time during the litigation. It is up to the discretion of the assigned justice whether he or she believes that such a settlement conference would be beneficial to the parties and the court and would further be in the interest of justice. “If the request is granted, the assigned justice shall make appropriate arrangements for the designation of a ‘settlement judge.’” This is another one of the “changes” that really is not earth shattering. It can’t happen without complete consent of the parties and it merely allows for another tool in the judge’s toolbox to try to settle the case.
A proposal from May 23, 2016, which has drawn some very strong comments, is one that is still pending and involves the use of direct testimony in non-jury trials by affidavit. A litigator who also works in federal court should not be shocked by this suggestion because such methodology is used in federal court in nearly 50% of the Southern District parts, depending upon the judge. It is also used by certain judges in New York County’s Commercial Division and at least by one judge in the Nassau County Commercial Division on selected cases.
The rule, as currently proposed, would require that direct testimony of the parties own witness in a non-jury trial or evidentiary hearing may be submitted in affidavit form; however, the court may not require the submission of the testimony of a witness who is not under the control of the party offering the testimony.
Rule 6 (amended December 1, 2015): From a technology point of view, the amendment to Rule 6 is perhaps the most interesting. It does not deal with the size of the font or the spacing between lines, or in fact the size of the paper or its margins. What it does say is “[e]ach electronically submitted memorandum of law and, where appropriate, affidavit and affirmation shall include bookmarks providing a listing of the document’s contents and facilitating easy navigation by the reader within the document.” Such an amendment may cause a problem to the electronically challenged law firm, but since the electronic submission of these documents has become commonplace (at least in the commercial division) then this process will speed up the court’s digestion of electronically submitted motions.
Rule 11-g, Proposed Form of Confidentiality Order (effective July 1, 2016): Frequently, cases in a commercial division part require confidentiality orders or stipulations. Historically, the problem is when the court leaves it up to the attorneys to come up with an acceptable confidentiality stipulation, the attorneys might argue about almost everything contained in the order/stipulation. When on the bench, I directed counsel to the confidentiality stipulation that was used by Justice Ramos in New York County. Rule 11-g rule provides a form of confidentiality order that “shall apply in those parts of the commercial division where the justice presiding so elects.” When a confidentiality stipulation is needed, the rule now requires that the parties “shall submit to the Court for signature the proposed stipulation and order that appears in Appendix B to these rules of the Commercial Division.” If the parties wish to deviate from appendix B, “they shall submit to the court a red-line of the proposed changes and a written explanation of why the deviations are warranted in connection with the pending matter.” There is currently an online version of Appendix B, which may be reached by a hyperlink from the online version of the rules.
Rule 14-a (effective July 1, 2016): is a new rule that was put into place involving rulings that would have occurred at disclosure/discovery conferences conducted by non-judicial personnel. The rule requires, if a party so requests, that prior to the conclusion of a conference parties prepare a written document setting forth any resolutions that were reached during the conference. This would then be submitted to the court for approval. An alternative to this written format would be dictating into the record any and all resolutions that were reached during the conference and that the record then be so-ordered. If the conference was a telephonic conference, and we will assume that there was no stenographic record maintained, the parties are to agree upon a stipulated proposed order within one business day of the conference and then that would be submitted to the court to be so-ordered. Of course, there is always the likelihood that the parties will not agree on what resolutions were reached, and if that happens, they are to advise the court so that the court can direct an alternative course of action.
The Advisory Committee had a busy summer and autumn. Six proposals for rule changes were pending public comment when this article was written.
Proposed Amendment to Rule 6 –– Hyperlinking from electronically filed documents (October 6, 2016): This pro- Ira B. Warshawsky, JSC, ret. posal will allow trial judges in their discretion to require “the parties to electronically file documents with hyperlinks[,]” allowing for immediate connection to a “linked” copy of the authority. “Authority” would include not only “court decisions” but a broad range of other sources, including statutes, rules, testimony in a transcript, regulations, government websites, as well as other documents filed in the NYSECF system.
Please note this is not the same as the “Bookmarking” amendment that was effective December 1, 2015.
Proposed new Rule 11-h (October 12, 2016): is directed at the sealing of court records This proposed rule precludes the sealing of court records “except upon a written finding of good cause, which shall specify the grounds thereof.” The rule then sets forth the definition of good cause. Good cause may include the protection of proprietary or commercially sensitive information, including without limitation, (i) trade secrets, (ii) current or future business strategies, or (iii) other information that, if disclosed, is likely to cause economic injury or would otherwise be detrimental to the business of a party or third-party.
In ruling on a sealing application, “the court shall consider the interests of the public as well as of the parties.”1
The proposed rule is identical to the current general sealing rule found at 22 NYCRR §216.1, except for the above quoted “Good cause” sentence.
This was purposefully designed for the business world “to clarify and highlight for courts and parties that the protection of proprietary sensitive business information in commercial disputes is an appropriate goal of, and “good cause” for, sealing of selected documents or portions of documents filed in the course of litigation.”
This is another example of where the voice of the corporate world has been heard by the Advisory Council. There are anecdotal stories of the reluctance of corporations to be involved in litigation in New York because of the public disclosure of business data and confidential information not otherwise relevant to a case. Clearly the OCA and Advisory Council believe such fear “has adversely and unnecessarily impacted New York’s attractiveness as a commercial litigation forum.”2
Proposed Amendment to Rule 26 Addressing Limitation of Total Hours of Trial (October 18, 2016): Current Rule 26 requires counsel to give the court a realistic estimate of the length of a trial. The proposed rule would require a party, if the court requests, to give the court the total hours it expects will be needed for direct, cross, redirect and argument during trial. The court may then rule on how many hours it will permit each party. The court may, of course, enlarge such total number of hours as needed. The benefits of such a rule, as per the Advisory Council, would be to avoid protracted trials which delay justice for other litigants. Whether a New York commercial litigator will agree with these “advantages”— only time will tell.
Proposed Amendment to the Rules to Include a Sample Forum Selection Clause (October 24, 2016): This proposal would add as a new Appendix C a “Commercial Division Sample Forum Selection Clause.” It provides the transactional lawyer with a court system approved clause.
Proposed new Rule addressing consultation on Expert Testimony in Advance of Trial (October 27, 2016): Here we have another proposed rule that enforces the power of the court in the Commercial Division. This rule gives the court the power to direct counsel to meet, prior to the pre-trial conference, and “consult in good faith to identify those aspects of their respective experts’ anticipated testimony that are not in dispute.”
Thus, areas of disagreement could be narrowed to “reduce the volume of technical testimony at trial” and result in a shorter trial. This is an appropriate adjunct to the Expert Disclosure Rule (Rule 13) and is in the same vein as other pre-trial obligations of the parties found in Rule 27-30.
Proposal to Amend Rule 20 Relating to Applications for Temporary Restraining Orders (November 1, 2016): Rule 20 currently requires that an applicant for a Temporary Restraining Order (“TRO”) give notice to the opposing parties “sufficient to permit them an opportunity to appear and contest the application” or the TRO will not be issued. When I was still on the bench, we followed a 24-hour rule.
The current proposal goes further. It would now require that the notice to the adverse party include copies of all supporting papers that will be part of their TRO application.
It is clear that the Office of Court Administration and, more specifically, the Advisory Council of the Commercial Division want to make New York State’s Commercial Division work smoothly and be attractive to the commercial bar. If the commercial practitioner wishes to participate in this process, he has the opportunity to do so by commenting on any proposed rule change by writing to John McConnell, counsel to the Office of Court Administration, at rulecomments@NYcourts. gov. There is usually a 60-day window for comments from the date that the proposed amendment is announced to the public.
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. He was voted one of the Top Ten Arbitrators in the 2016 New York Law Journal Reader Rankings Annual Survey for the third year, and was 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.
1. Emphasis added.
2. Memorandum, dated October 12, 2016, Request for Public Comment on Proposed Rule of the Commercial Division to Address the Sealing of Court Records.