Source: https://argumentsanddemonstrations.com/page/2/
Timestamp: 2019-04-22 06:30:37+00:00

Document:
Predictions are difficult, especially about the future. Much to my surprise, Judiciary Law 470, requiring non-resident attorneys to maintain a physical office in New York in order to practice here, has survived a constitutional challenge.
A year ago, I posted about the Court of Appeals determination in this case, construing Judiciary Law § 470 as meaning what it says: a non-resident attorney must maintain a physical office in New York in order to practice here. The Court had responded to a certified question from the Second Circuit, seeking to know whether the plaintiff’s constitutional challenge to § 470 could be avoided by an alternative reading. It seemed at the time that the Court of Appeals’ construction of the statute made the challenge unavoidable, and that it must inevitably fall afoul of the Privileges and Immunities Clause of the US Constitution.
Well, right and wrong. The challenge was indeed unavoidable, but the statute has survived.
The challenge came in federal court from a New Jersey attorney, duly admitted in New York and in compliance with all other requirements, who wished to practice in New York but not to open a second office here. She observed, correctly, that a New York attorney has no need for a formal office but can work from home.
The District Court found that the statute unduly burdened the rights of non-resident attorneys, without a corresponding justification in a state interest. In the Second Circuit, the State argued that the statute aimed only at ensuring that the attorney was amenable to the service of process, and could be satisfied by the designation of an agent for the service of process or even the maintenance of a post office box. Existing New York case law, unfortunately, did not support that interpretation.
Before considering the constitutionality of the statute, the Second Circuit wanted to be sure that the more lenient view of the statute’s requirements was not available and that the constitutional challenge could not be avoided. It therefore certified the question of what the minimum requirements for compliance were. The New York Court of Appeals rejected the alternate interpretations, holding that a physical office within the state is required in order to facilitate the service of process on attorneys.
There was a dissent, which regarded the majority’s approach as erroneously placing the burden of proving discriminatory intent on the plaintiff, instead of requiring the state to justify the discriminatory statute.
Let’s resist the impulse to snarkiness, and stick to the legal issues. Yes, this is the one involving serious allegations of fraud against Donald Trump in one of his business ventures. The proceeding was commenced in August, 2013, well before Trump became an actual, and now a leading, presidential candidate, and so any claim of a political witch-hunt must go by the board. A detailed rundown of the Attorney General’s allegations is unnecessary for our discussion, and in any event has been done better than I could by Eric Turkewitz on his NY Personal Injury Blog.
Whether those claims can be substantiated is not the issue here. The actual issue here, once the nature of the action is properly understood, is in fact a rather simple limitations question of which period governs: When the Attorney General sues over a fraud, under the authority of Executive Law § 63(12), does the claim involve a “liability, penalty or forfeiture created or imposed by statute” (CPLR 213 (2), 3-year period), or one of the six-year periods of CPLR 214? This is resolved by well-established principles, as will be seen.
As a threshold matter, however, the Appellate Division reconsidered one of its recent precedents, found it to be erroneous, and overruled it. We’ll look at that aspect of the case first, and then look directly at the limitations issue.
All we need know of the petition is that the Attorney General alleged numerous fraudulent and improper practices against Donald Trump individually and several of his namesake business entities. The fraud allegations were framed in separate causes of action: first under the Attorney General’s statutory authority pursuant to Executive Law § 63(12), and as common-law fraud. Common-law fraud, of course, carries a six-year limitations period, and there is no issue as to the timeliness of those claims.
The issues concern the Executive Law cause of action. First, whether it is properly pleaded as an independent cause of action, and assuming that it is, whether it carries a limitations period different from the common-law fraud claims.
In State v Cortelle, 38 N.Y.2d 83 , the Attorney General sought to enjoin the respondents from a scheme of obtaining title to distressed real property under false pretenses, and to dissolve the corporate entities through which they acted. The issue was the same as ultimately arose in Trump, whether the cause of action was one “created or imposed by statute,” subject to a three-year limitations period under CPLR 214(2), or whether it was subject to the six-year catch-all provision of CPLR 213. The Court of Appeals found that the State’s right to enjoin such conduct and to dissolve the corporate entities extended back to the common-law. That it had since been codified by statute did not mean that it was “created or imposed” by statute. CPLR 214(2) therefore did not apply, and the applicable period was the six-year catch-all.
This said nothing about whether the Attorney General could bring an independent Executive Law claim, but concerned only whether the specific claim had been “created or imposed” by the Executive Law.
In the 2013 Charles Schwab decision, the First Department considered claims of securities fraud brought by the Attorney General, including a cause of action under Executive Law § 63(12). The First Department dismissed the Executive Law cause of action, citing Cortelle for the proposition that the Executive Law “does not create independent claims”. Cortelle, as we have seen, does not support that proposition.
The First Department thus concluded that the decision in Charles Schwab had been based on a misreading of Cortelle, and was erroneous. Seeing no reason to allow the error to languish in the law, furnishing precedent for further erroneous decisions, the First Department overruled it. The Attorney General may, indeed, claim allege independent fraud causes of action under both the Executive Law and common-law fraud.
Finally addressing the limitations issue directly, the First Department found that the rationale of Cortelle was controlling. That is, Executive Law § 63(12) neither creates nor imposes a new liability or penalty for fraudulent conduct, but simply gives the Attorney General standing to sue. The claim is therefore not subject to the three-year period of CPLR 214(2), but rather to the six-year residual period of CPLR 213(1). The first cause of action was therefore timely.
A similar situation arose in 2014, in regard to the attorney-deceit statute, Judiciary Law §487. In Melcher v Greenberg Traurig, the Court of Appeals held that while the roots of this claim originated in the First Statute of Westminster (in 1275!) the claim entered New York law as part of our common law, at the creation of the country in 1776, when both English statutory and common law were adopted by common consent. Thus, what appears to be a statutory cause of action really isn’t, and the three-year period doesn’t control. As with the Executive Law cause of action in Trump, the controlling period is the six-year residual period.
In a 4-3 decision, the Court of Appeals held here that claims challenging conveyances or encumbrances based on a forged deed are not subject to statutes of limitations.
The claim here was that the interest of plaintiff’s decedent, her father Percy Lee Gogins, had been purportedly conveyed to his sister and niece, the defendants Dorothy and Tonya Lewis, by means of a forged deed, recorded in 2001. Plaintiff clearly knew of the claimed forgery as early as 2002, when she commenced an action to set aside the deed. That first action was dismissed for lack of capacity, since plaintiff was not at that time the administrator of Gogins’ estate. In 2009, the defendant Tonya Lewis over $269,000 from Bank of America, secured by a mortgage against the property. By August of 2010, plaintiff had been made administrator of Gogins’ estate, and commenced this action against Dorothy Lewis, Tonya Lewis, Bank of America and others, to declare both the deed and mortgage null and void as based on a forged deed. The defendants raised limitations defenses, and moved to dismiss. The plaintiff cross-moved to strike the defenses.
The majority in Faison held that the nullity of the void deed led to the conclusion that no limitations period applied. The forged deed being void, its “legal status cannot be changed, regardless of how long it may take for the forgery to be uncovered.” Specifically, a forged deed cannot be regarded as simply a fraud, governed by CPLR 213 (8), even though that contains an extension for delayed discovery of the fraud. The Court analogized the situation of a forged deed with that of an illegal contract, also void in its inception, which carries no limitations period. (see, Riverside Syndicate, Inc. v. Munroe, 10 N.Y.3d 18 ) The mere passage of time, or the expiration of a limitations period, cannot have the effect of validating what the law has expressly rejected.
The dissent would have held that the discovery provisions of CPLR 213 (8) provide a sufficiently long period in which to discover and challenge a forged deed as well as a merely fraudulent one, and that the interests of protecting interests in property against stale claims mandated its applicability here.
The Court of Appeals here endorsed the holding of VOOM HD Holdings LLC v EchoStar Satellite L.L.C., 93 A.D.3d 33, 939 N.Y.S.2d 321 [1st Dept., 2012], concerning imposition of sanctions for spoliation of evidence. Imposition of a sanction for spoliation requires proof of three elements: (1) control over the evidence and an obligation to preserve it; (2) that the party destroyed or lost the evidence with a “culpable state of mind”; and (3) that the evidence was relevant to the claim or defense. “Culpable state of mind” includes ordinary negligence. Relevance is established where the evidence is lost intentionally or willfully, so as to amount to gross negligence; but where the loss is merely negligent relevance must be shown by the proponent of sanctions. Gross negligence, such as to support a finding of relevance, may be shown by serious failings such as not issuing a written litigation hold to employees, failing to identify “key players” and ensure that their documents are preserved, or continuing to delete emails. The distinction between simple and gross negligence thus becomes highly important.
Here, the dispute centered primarily on just that distinction: whether the defendant Varig Logistica (“VarigLog”) had failed to preserve electronically stored information (“ESI”) due to ordinary negligence or gross negligence.
VarigLog had failed to preserve emails, had not instituted any sort of litigation “hold” to ensure that materials were preserved, did not even have a centralized storage system for emails but stored them on the computers of individual employees, and that such as it did have on a central system had been lost in a series of computer crashes. Supreme Court held that the failure to establish a litigation hold established gross negligence, struck VarigLog’s answer, and imposed a trial sanction of an adverse inference upon certain other defendants. The Appellate Division was divided on the issue, but the majority rejected the finding that the failure to establish a litigation hold amounted to gross negligence per se, and reviewing the facts found only simple negligence. The majority held that the plaintiff had failed to show that the missing information was relevant, and struck the trial adverse inference sanction. The majority also noted its view that the adverse inference charge was so strong as to amount to summary judgment.
The Court of Appeals held that the record supported the Appellate Division conclusion of simple negligence. Rejecting the idea that the failure to institute a litigation hold, or some other factor, would lead to a per se finding of gross negligence, the Court agreed with the Appellate Division majority that all of the facts led to a determination of simple negligence. It did not, however, agree with the Appellate Division as to the sanction. It found that the majority had ignored the plaintiff’s arguments as to relevance. The Court remitted the matter to Supreme Court for further findings as to relevance.
There was a two-judge dissent, which would have found gross negligence. The dissent noted that the Court’s opinion fails to define “gross negligence,” and would have adopted the standard of the failure to exercise even slight care.
The Best Legal Brief I Have Ever Read.

References: § 470
 § 470
 § 63
 § 63
 § 63
 § 63
 §487
 v.