May 1 2014, By: Hon. Ira B. Warshawsky, J.S.C. (Rtd.)
During the last month, John W. McConnell, Counsel, to Chief Administrative Judge Gail Prudenti, set forth five proposed changes to how the Commercial Division operates – both substantively and procedurally. Many of these changes were first floated to the public in the Report to Chief Judge Jonathan Lippman by his Task Force on Commercial Litigation in June 2012. In each case, comment on these proposed amendments or new rules was invited with varied deadlines for submission.
1. STAGGERED COURT APPEARANCES
A new rule has been proposed related to staggered court appearances, intended to “streamline the litigation process in the Commercial Division.” However, as noted in the Preamble to the proposed rule “it will be ineffectual without the cooperation and participation of litigants.” As further noted, “the proactive and earnest adherence to such rules by parties and their counsel” is required to make it work.
To summarize the proposed rule, each oral argument on a motion will be assigned a time slot (length of time solely in discretion of the court).
The second paragraph of the rule reads:
“(b) In order for the court to be able to address any and all matters of concern to the court and in order to avoid the appearance of holding ex-parte communications with one or more parties in the case, even those parties who believe that they are not directly involved in the matter before the court must appear at the appointed date and time assigned by the court unless specifically excused by the court. However, if an individual is appearing as a self-represented person, that individual must appear at each and every scheduled court appearance regardless of whether they anticipate being heard.”
I am sure the scriveners of the proposed rule had specific situations in mind when they wrote this, but it may need further explanation in a comment subsection.
The third paragraph anticipates a failure of communication in our high-tech systems and directs each attorney receiving notice of an appearance to convey all the details of such appearance to “all other parties by e-mail.”
Interestingly enough, putting the proposed rule aside for the moment, there is a clear assumption that communications by attorneys in a Commercial Division case will be by e-mail, and all parties are bound to exchange e-mail addresses and keep them current.
Historically, some judges have staggered appearances as well as oral arguments on motions but they did it on their own–no one told them they had to do it. I believe it is a good idea as long as the judges do not consider it a challenge to their ability to control their own calendar and attorneys cooperate in the process.
Apparently the genesis of this proposal was the adverse reaction by attorneys to the practice of certain court parts scheduling all oral arguments on one day, requiring all attorneys to appear at one time, each having no idea when his or her matter would be called for argument.*
2. NON-PARTY ESI DISCOVERY
Those litigators who have obtained ESI from non-parties are aware of the difficulty of such a task, and, if you have represented a non-party in such a situation, you know how annoying, burdensome and expensive it can be for your client.
The Commercial Division Advisory Council also being cognizant of such problems, have proposed a new Commercial Division Rule (22 NYCRR $202.70(g)) prospectively numbered “34” to assist with the problem. It is very “short.”
“Rule 34. Discovery of Electronically Stored Information from Nonparties. Parties and nonparties should adhere to the Commercial Division’s Guidelines for Discovery of Electronically Stored Information(“ESI”) from Nonparties, which can be found in Appendix A of the Commercial Division.”
When you view the Rules online, there will be a hyperlink to Appendix A. It is not “short.” , It is careful in its language. It “encourages” the parties to act in a certain fashion and for the most part and in most cases, uses “should” rather than “shall or must”.
The Guidelines, III A-F, set forth all the familiar parameters for the discovery of ESI, also considering proportionality, and adding the factor of “[a]vailability of the ESI from another source, including a party” (III(D)).
The Guidelines integrate non-party ESI discovery into the meet and confer model and strongly urge informal methods to resolve disputes, reduce cost and even suggest a very forward step: “the use of advanced analytic software applications and other technologies that can screen for relevant and privileged ESI.” (Sec. V). Section V of the Guideline also requires the requesting party defray “the non-party’s reasonable production expenses.”
If the requesting party and the non party are unable to reach an agreement, they are “encouraged to seek resolution by availing themselves of the Court’s system’s resources.” The resources described are conference calls with the law clerk or special referee and the appointment of an unpaid mediator in accordance with Rule 3 of the Commercial Division Rules.
This section assumes the availability of these resources in all courts (without regard to reduced personnel and budget cuts) and does not take into consideration the parties’ calendar needs in order to expeditiously move forward with their discovery. There are times when non-party ESI is the stumbling block in moving forward with discovery, especially depositions. This of course is counsel’s problem, not the courts, and counsel must plan accordingly.
The Guideline should include, or at least suggest, an option for the parties to use private mediation to resolve their issues. The way the guideline currently reads, it could be inferred that you could not use private mediation for such purposes. The use of private mediation would prevent the parties from being hamstrung by the court’s regretful lack of staff to handle such issues (and, yes, I have a vested interest in such a proposal).
In the penultimate section of the Guidelines (Sec. VI) we now have the use of “shall” when it comes to defraying costs of a non-party in accordance with the CPLR: production at a deposition (CPLR 3111) or when a non-party responds to a Subpoena Duces Tecum (CPLR 3122(d)). This section superimposes the CPLR onto The Guidelines for Non-Party ESI Discovery and delineates the types of charges that may be included as reasonable production expenses. The list is very broad and clearly has been gleaned from case law on this topic or, perhaps, the demand of a non-party’s attorney.**
3. THE PRIVILEGE LOG
Another proposed rule change quite likely to impact on the litigator’s daily practice is the preparation of the privilege log.
Pursuant to CPLR 3122 (a) (2)(b), a party must serve formal notice to withhold otherwise relevant documents from their discovery production on the basis of privilege. The “privilege log” shall indicate “the legal grounds for withholding each such document” providing the (1) type of document; (2) the general subject matter of the document; (3) the date of the document; and (4) such other information as needed to identify it.
The Subcommittee on Procedural Rules to the Commercial Division Advisory Council has suggested a revision to the rule. (Note-they cannot amend the CPLR so they have done an end-around by amending the Commercial Division Rules.) This is not the first time–nor will it be the last–that this methodology is used in New York, and it has been used successfully in other areas of New York law.
The subcommittee believes that the meet and confer process, as set forth in Commercial Division Rule 8, is the appropriate time in which to raise the privilege log as an issue for discussion. Their proposal suggests that the issue should also be revisited from time to time during the course of litigation. The Subcommittee suggests that the categorical designation for privileged documents be used as opposed to the document-by-document entries, citing to a statement made by US Magistrate Judge John Facciola and Jonathan Redgrave (Chair Emeritus of the Sedona Conference): “the object of this exercise is to create a set of natural differentiations among documents so the parties can say, once again with confidence, what is true of items within the category is true of the whole.”
“To the extent the parties agree to employee a categorical approach to privilege log designations, a party receiving a privilege log that groups documents into categories and, therefore, departs from the traditional document-by-document privilege review, may not object solely on that basis, but may object if the substantive information required by this rule has not been provided in a comprehensible form. In order to reduce the likelihood of this occurring the Proposal imposes two safeguards: (a) the submission, along with the categorical log, of a certification, pursuant to Part 130 of the Rules of the Chief Administrator, ‘certifying to the facts supporting the privileged or protected status of the information included with in the category;’ and (b) the requirement that a ‘responsible attorney’ (i.e. not a newly minted attorney or paralegal) be involved in actively overseeing the privilege review.” (Call for Change in Privilege Log Practice by the Chief Judge’s Task Force on Commercial Litigation in the 21st Century citing to the Task Force Report at 17). It would be helpful if examples were given in the document supporting this rule change since I believe I may safely assume very few people have ever done categorical groupings on a privilege log.
The insertion of “certification by the producing lawyer” and concomitantly subjecting him or her to sanctions and attorney’s fees awards is the real lever in this proposed change.
Under this proposed amendment, if you would object to the categorical approach and insist upon the old-fashioned way of document-by-document approach (as is written in the law), the producing party may move to allocate to you the costs associated with such an undertaking. The support for such an interpretation of law is allegedly found in US Bank, N. A. v. Greenpoint Mortgage Funding Inc., 94 A. D.3rd 58 (1st Department 2012) (adopting the cost shifting approach set out in Zubalake v. UBS Warburg, 217 F.R.D. 309 (S.D.N.Y. 2003), and concluding that the IAS court has discretion to allocate the costs of production to the requesting party). I do not believe the issue here is really cost shifting, but rather the ability to force a party into being bound by a rule that is not found within New York statutes. The use of a categorical privilege log has been found to be appropriate in a Southern District case, Assured Guar.Mun. Corp. v. UBS Real Estate Securities, Inc.,Nos 12Civ. 1579(HB)(JCF), 2013 WL1195545(S.D.N.Y.March 25, 2013) (authorizing use of a categorical privilege log and reserving the right to shift costs if producing party mischaracterizes documents on log). These are the words found in the Advisory Council’s proposal. What Magistrate Judge Francis actually said in granting the UBS proposal for a categorical privilege log was:
It shall produce a privilege log of documents protected by work product and attorney-client privilege consistent with this opinion. Should there arise a dispute regarding categorization of documents, the parties may submit them for in camera review, and I may order the documents to be recategorized. Moreover, if the producing party mischaracterizes a document, I may find waiver or shift the costs and attorneys’ fees incurred by the party seeking such review to the extent deemed appropriate. If we follow Magistrate Francis ruling, and if that is the intent of the proposal, our New York Commercial Division judges may find themselves spending substantial time doing in camera review of privilege log entries. To quote from the proposal “[s]imply put, under the current proposal an attorney who unreasonably insists that the producing party prepare a document by document privilege log stands to have the costs of that preparation shifted to him or her.”***
4. SETTLEMENT-RELATED DISCOVERY
Another proposal concerns adding “Settlement-Related Discovery” to the list of items to be discussed at the meet and confer prior to the Preliminary Conference. The original proposal would have required a discussion of “Settlement-Related Discovery/Disclosure” both prior to the Preliminary Conference and during the Preliminary Conference. However, the Advisory Council has adopted the Task Force’s proposal only insofar as it requires such discussion before the Preliminary Conference. This is not an unheard of device and many believe it will lead to early case settlement discussions. Nothing prevents the parties from raising it at the Preliminary Conference. ****
5. ASSIGNMENT OF CASES
An additional proposal sets out a timeframe for a party whose matter is not in the Commercial Division to file an RJI certifying the case meets the Commercial Division requirements within 90 days of service of the Complaint, in order to have the case assigned to a Commercial part. Should the parties fail to file an RJI within 90 days, they would be precluded from having the case transferred to the Commercial Division, “except by written application to the Administrative Judge for ?good cause shown.'”
Apparently, in some locales, a commercial case is “not benefitting from early judicial case management because they are not assigned to a Commercial Division part until discovery is well underway or a motion for summary judgment is made.” Of course, some counsel may believe that if they are working well on their own they may not benefit from a Commercial Division Judge’s guiding hand. But in my opinion, it would be better to have that “guiding hand” available when needed, and to have your case in a Commercial Part earlier rather than later. *****
I would urge all interested parties to read these proposals and comment on them accordingly.
The Commercial Division Advisory Council and their multiple subcommittees have worked hard to make New York State’s Commercial Division a “better place to be.” They and their support staff should be applauded for their efforts.
Hon. Ira B. Warshawsky is a member of NAM’s (National Arbitration and Mediation) Hearing Officer Panel and is available to hear arbitrations and mediations throughout the New York Metro area. He is a retired Justice of the Supreme Court, Nassau County, Commercial Division, and he has been voted one of the Top Ten Mediators in New York State by the New York Law Journal Reader Rankings Survey. Hon. Warshawsky is Of Counsel to Meyer, Suozzi, English & Klein, P.C., in Garden City, NY.
Click here to view Judge Warshawsky’s resume.
For any questions or comments, please contact Jacqueline I. Silvey, Esq. / NAM General Counsel, via email at firstname.lastname@example.org or direct dial telephone at 516-941-3228.