New York Court of Appeals Alert (March 2019)

This first appeared on the SGR Blog.

The mid-2019/2020 Term of the Court of Appeals did not result in any “blockbuster” civil law decisions. The Court, however, did release two opinions that demonstrate how the panel addresses the application of precedents, on the one hand, and substantive conflicts in the Appellate Divisions, on the other.

In the first case, over a stinging dissent, the Court adhered to a 1999 decision  holding that a “stairway” may constitute a “sidewalk”  for tort liability purposes.  And in the second, the Court resolved a split in the Departments over whether the filing of  suit by a New York attorney who did not (as required by law)   maintain an office in the state,  was a curable violation.

Randall M. Hinton v Village of Pulaski, 219 NY Slip Op 01261. Decided on February 21, 2019

Question: Is a “Stairway” a “Sidewalk”?

Answer: Yes for purposes of a written notice requirement for municipal liability.

The Village of Pulaski Code provides that “[n]o civil action shall be maintained” against the Village for personal injury sustained as a result of a defect in “any street, highway, bridge, culvert, sidewalk or crosswalk” unless prior written notice of the alleged defect is provided to the Village.  Hinton sued the Village after he fell while descending an exterior stairway that connects a public road to a municipal parking lot. The Village had not received prior written notice of the alleged defect. The Supreme Court granted summary judgment for the Village and the Appellate Division unanimously affirmed.

In Woodson v City of New York, the Court of Appeals determined that a stairway may be classified as a sidewalk for purposes of a prior written notice statute if it “functionally fulfills the same purpose that a standard sidewalk would serve.” In the twenty years since Woodson was decided, the Legislature did nothing to signal disapproval of this interpretation.  According to the Court of Appeals, as the identical question has been long since resolved by the Court in Woodson, then Hintoninvolved the application of settled precedent. The Court saw no compelling reason to overrule a longstanding precedent and affirmed the dismissal.

Judge Wilson wrote a lengthy and stinging dissent (rebuke) joined by Judge Fahey.

His dissent begins: In this case we ask is a stairway a “sidewalk”? Conventions of normal English, legislative policy, and the invention of the escalator, would answer “no.” But through the alchemy of a “functional equivalence” test conjured from [Woodson] one can buy a sidewalk to heaven, climb the sidewalk to the stars, and build a sidewalk to paradise (with a new slab every day). Indeed, while on the subject of alchemy, if Harry Potter was set in New York, his Dursley abode would no doubt change to a cupboard under the sidewalk.

The dissenters accuse the majority of rewriting the Village Law to provide that the prior written notice rule applies to actions seeking damages for personal injuries allegedly sustained as a consequence of a defective village stairway — even though the legislature specifically declined to include stairways in the list of municipal passageways to which prior written notice protection applies “evincing an intent to exclude any others not mentioned”. “They rejected the so-called  “functional equivalence test,” where if a court thinks something not on the Village Law 6-628 list is sufficiently like something on that list, it rewrites the statute to include it.  The dissent refers to Groninger v Village of Mamaroneck in which the Court of Appeals held that a parking lot served  the functional purpose of a highway because “it was owned and maintained by the Village and accessible to the general public for vehicular travel.”  In Groninger, the three dissenting Judges explained at length that highways — accommodating moving vehicles — and parking lots — accommodating stationary vehicles — had precisely the opposite “functional purpose”.

Finally the dissent notes that, by concluding that a slapdash stairway is a sidewalk because they both have the same “functional purpose”, conveying people from place to place, the Court’s holding expands a single fact-specific determination into an erroneous doctrine.

Arrowhead Capital Fin., Ltd v Cheyne Specialty Fin. Fund L.P., 219 NY Slip Op 01124. Decided on February 14, 2019

Question: Nonresident attorneys admitted in New York must maintain a physical office in the State in order to practice law in New York. Does the failure by a nonresident attorney to comply with this requirement at the time a complaint is filed render that filing a nullity mandating dismissal of the action?

Answer: No.  The violation may be cured.

In 2006, the predecessor in interest of Arrowhead Capital Finance, Ltd. and Cheyne Specialty Finance Fund L.P. lent money to a group of borrowers secured by certain collateral to be held in trust by Cheyne, the senior lender. The borrowers defaulted on the subordinated note provided to Arrowhead. Arrowhead sued and obtaining a $2.4 million judgment against the borrowers that it could not collect.

Arrowhead sued Cheyne and its general partner based on allegations that defendants failed to protect the collateral securing Arrowhead’s subordinated note, thus depriving Arrowhead of its security for repayment. The complaint was signed and filed by Arrowhead’s counsel, an attorney admitted in New York, and listed business addresses in both Pennsylvania and Manhattan.

Defendants moved to dismiss the complaint for, among other reasons, failure to state a claim. Supreme Court granted defendants’ motion in part, dismissing all claims against the general partner and certain claims against Cheyne.

While this motion was pending, defendants informed Supreme Court that it appeared plaintiff’s counsel did not maintain a physical office in New York in violation of Judiciary Law 470.  Supreme Court permitted defendants to file a second motion to dismiss based on this alleged violation. That same day, separate New York counsel entered an appearance on Arrowhead’s behalf.

Supreme Court dismissed the remaining claims against Cheyne without prejudice, finding that plaintiff’s counsel resided in Pennsylvania and there was “no evidence that [he] maintained an office or a phone in New York when [the] action was filed.”

The First Department unanimously affirmed.  The Appellate Division held that “the commencement of the action in violation of Judiciary Law 470 was a nullity” and that “subsequent retention of co-counsel with an in-state office did not cure the violation.” The Appellate Division also affirmed the dismissal of the complaint as against the general partner.

A split in the Departments of the Appellate Division existed and leave to appeal was granted to resolve this issue.

Since 1862, an non-resident attorney who is regularly admitted to practice as an attorney in the courts of New York, whose office for the transaction of law business is within the state, may practice as such attorney. In other words, the law requires that nonresident attorneys maintain a physical office in New York in order to practice here.

The Second and Third Departments had expressly rejected the nullity rule. Those courts applied a general rule that representation of a party by a person who was not authorized or admitted to practice law does not create a nullity or render all prior proceedings void per se. Those departments relied on the Court of Appeals’ holding in Dunn v Eickhoff, that disbarment of a lawyer creates no nullities, the person involved simply loses all license to practice law. Thus, those Departments held that a party may cure a section 470 violation with the appearance of compliant counsel or an application for admission pro hac vice by appropriate counsel.

Defendants argued that Dunn involved plaintiffs’ affirmative use of the disbarment of their own attorney for strategic reasons and should not control. Instead, defendants urged the Court to adopt the First Department’s approach, which required that a court dismiss the complaint without prejudice after finding a violation. Without such a deterrent, defendants argued, Section 470 would itself be a nullity.

The Court of Appeals agreed with the Second and Third Departments that, given the holding in Dunn, it would be incongruous to conclude that actions taken by an attorney duly admitted to the New York bar who has not satisfied the office requirement were a nullity. Thus a violation of Judiciary Law 470 did not render the actions taken by the attorney involved a nullity. Instead, the party may cure the Section 470 violation with the appearance of compliant counsel or admission pro hac vice by appropriate counsel. Where further relief is warranted, the trial court has discretion to consider any resulting prejudice and fashion an appropriate remedy and the individual attorney may face disciplinary action for failure to comply with the statute. The Court concluded that this approach ensured that violations were appropriately addressed without disproportionately punishing an unwitting client for an attorney’s failure to comply with section 470.

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