LexisNexis™ Features Firm Associate Matthew McCann’s Articles on Constitutional Challenges to the SEC’s Administrative Power

Litigation

Over the last seven years, the home-court advantage that the Securities and Exchange Commission (the “SEC”) has as a party in administrative actions before the SEC has been a hot-button issue among practitioners in the field. Capturing this interest and research, Firm Associate Matthew McCann wrote two articles which were published as part of the LexisNexis™ Emerging Issues Analysis series: in October 2017, “The Constitutionality of the SEC’s Administrative Proceedings: Is the Home-Court Advantage Disappearing?” and, in October 2018, “The Immediate Aftermath of SEC v Lucia on Administrative Law – Impact on Other Administrative Agencies with Similar Appointments Clause Issues and the SEC’s Home-Court Advantage.

A seminal case in this area of the law is the 2011 decision in SEC v. Gupta. Judge Jed Rakoff of the United States District Court, Southern District of New York, allowed the Equal Protection claim of Rajat K. Gupta to proceed against the SEC in federal court. The decision was significant because it permitted Gupta’s claim to proceed, despite the fact that the SEC had elected to proceed against Gupta in its in-house administrative proceedings. The SEC moved to dismiss this action. Judge Rakoff denied the motion, holding that a district court could have jurisdiction over constitutional claims against the SEC and that there is no requirement that a plaintiff exhaust administrative remedies before bringing such a claim.

In 2012, Mr. McCann, then at a small white-collar, securities and complex civil litigation firm in Manhattan, worked intensely on an action, which was brought by the SEC against Egan-Jones Ratings Company (“Egan-Jones”). In addition to defending the SEC action, the team of lawyers he was part of filed a complaint on behalf of Egan-Jones in the United States District Court for the District of Columbia. That complaint sought to have the SEC action removed to the federal court because of inherent biases in the SEC administrative procedure which were at odds with Egan-Jones’ rights to Due Process and Equal Protection.

In the Egan-Jones matter, relying, inter alia, on the Gupta decision, the attorneys argued, inter alia, that the SEC’s Rules of Practice were more narrow than the Federal Rules of Civil Procedure in ways that mattered: To seek documents and depositions that a litigant would be able to request without prior permission as a matter of course in federal action, a respondent in an SEC administrative proceeding needed to request the opportunity to issue subpoenas, which the SEC Administrative Law Judge (“ALJ”) may deny, and which the SEC, as a party, has the ability to avoid or frustrate by motion to quash.1

From 2011 to 2015, litigants continued to challenge the SEC’s home-court advantage as violating the Equal Protection and/or Due Process Clauses. The Seventh Circuit’s 2015 decision in Bebo v SEC highlighted the ongoing debate regarding the SEC’s continued use of administrative enforcement proceedings for securities violations, and also effectively ended Equal Protection and Due Process claims. The Seventh Circuit held that federal courts did not have jurisdiction to hear claims regarding the SEC’s administrative process and forum until all administrative remedies had been exhausted. That decision found that the statutory scheme requiring administrative exhaustion provided adequate protection to an SEC respondent, distinguishing Gupta.

From there, the attack on the legitimacy of the SEC proceeding shifted the focus to questioning whether the ALJs were appointed properly as per the Appointments Clause of the Constitution. There was a circuit split on the issue, which made its way to the United States Supreme Court in Lucia v. SEC. That case was decided earlier this year, in June 2018.

In Lucia, the Supreme Court held that the ALJs are inferior officers within the meaning of the Appointments Clause of the Constitution. The basis for this holding was that ALJs hold “continuing office[s] established by law” and exercise “significant discretion when carrying out … important functions.” The Appointments Clause lays out the permissible methods of appointing “Officers of the United States,” a class of government officials distinct from mere employees. Lucia required the Supreme Court to decide whether ALJs of the SEC qualify as such “Officers.” The Supreme Court held that they do.

The SEC’s interpretation and implementation of Lucia, however, has not resulted in the radical change that the litigants in GuptaEgan-JonesBebo and many other actions sought. The SEC issued an Order on June 21, 2018, the same day as Lucia, staying all pending administrative proceedings. On August 22, 2018, the SEC issued a subsequent Order, lifting the stay and noting that, on November 30, 2017, while Lucia was pending, it ratified the appointments of Chief ALJ Brenda and ALJs and, “[i]n an abundance of caution and for avoidance of doubt,” reiterated “our approval of their appointments as our own under the Constitution.”

The SEC’s treatment of and response to Lucia has been essentially to put the imprimatur required by the Appointments Clause on the ALJs who had already been chosen. The SEC did not terminate the current ALJs and start a new proper process pursuant to the Appointments Clause. Whether this will be viewed as an effective remedy will be seen as cases are heard by the ALJs approved by the procedure in the August 22, 2018 Order and later appealed. In the interim, the impact of the Appointments Clause violations found in Lucia do not appear to have led to the meaningful change in the substance of the review the cases brought before the SEC receive, in contrast to what the consequences likely would have been, had the SEC’s administrative procedures been found in violation of the Due Process and/or Equal Protection Clauses.

1 That case was ultimately withdrawn as a part of a settlement with the SEC, resolving both the district court and SEC action.

 

Posted by MMcCann

Beware of Unduly Restrictive Employment Agreements – The Courts Will Not Enforce All Non-Competition Agreements Made by Employers and Employees

Litigation

In an August 2018 decision, Long Is. Minimally Invasive Surgery, P.C. v. St John’s Episcopal Hosp., 164 A.D.3d 575 (2d Dep’t 2018), the Second Department had the occasion to revisit and apply some of the key holdings in New York employment law regarding restrictive covenants/non-competition agreements from the New York State Supreme Court Appellate Divisions and the New York Court of Appeals over the last 40-plus years.

Long Island Minimally Invasive Surgery, P.C. (“LIMIS”) is a medical practice specializing in weight-loss surgery that also provided general surgery and related services. During the period of time relevant to the case, LIMIS had seven offices located throughout the New York metro area. Its doctors performed surgery at Mercy Medical Center (“Mercy”) in Rockville Centre in Nassau County.

In June 2010, LIMIS hired Javier Andrade to perform weight-loss and other types of surgery, and related services. LIMIS and Andrade entered into an employment agreement with a three-year term which contained a restrictive covenant barring Andrade from performing any type of surgery for two years within 10 miles of any of LIMIS’ seven offices and affiliated hospitals following the end of his employment with LIMIS. Andrade worked almost exclusively in Nassau County at LIMIS’ Freeport and New Hyde Park offices, and performed surgery at Mercy. Andrade continued to work for LIMIS beyond the three-year term of the agreement. In April 2014, LIMIS terminated his employment without cause.

In September 2014, Andrade accepted a position as the interim chairman of the department of general surgery at St. John’s Episcopal Hospital (“St. John’s”). Andrade’s new office, his only office at St. John’s, is located in Rockaway Park, outside the 10-mile “restricted zone,” although St. John’s Episcopal Hospital itself is located within the restricted zone

LIMIS sued Andrade and St. John’s Episcopal Hospital, seeking damages and injunctive relief, based on Andrade’s alleged breach of covenant. Andrade and St. John’s Episcopal Church moved for summary judgment arguing, inter alia, that the covenant was invalid as a matter of law. The lower court granted the motion for summary judgment dismissing the complaint, and the Second Department affirmed that dismissal on appeal.

At the outset of its reasoning, the Second Department set forth well-accepted principles which animate New York employment law on restrictive covenants/non-compete agreements:

  • Agreements restricting an individual’s right to work or compete are not favored and, thus, are strictly construed.
  • A restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.
  • The determination of whether a restrictive covenant is reasonable involves the application of a three-pronged test. The violation of any prong renders the covenant invalid. A restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer; (2) does not impose undue hardship on the employee; and (3) is not injurious to the public.
  • With agreements not to compete between professionals, courts have given greater weight to the interests of the employer in restricting competition within a confined geographical area.
  • The application of the test of reasonableness of employee restrictive covenants focuses on the particular facts and circumstances giving context to the agreement. The rationale for the differential application of the common-law rule of reasonableness was that professionals are deemed to provide unique or extraordinary services.

The Second Department found that Andrade and St. John’s had shown that the provision prohibiting Andrade for a period of two years from practicing surgery of any kind within a 10-mile radius of all LIMIS offices and affiliated hospitals, even those at which he had never worked was geographically unreasonable, because it “effectively barred him from performing surgery, his chosen field of medicine, in the New York metropolitan area.”

The Second Department also found that the lower court was not wrong in declining to modify the provision instead of invalidating it. Partial enforcement is sometimes appropriate if the employer demonstrates a legitimate business interest and an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct. LIMIS did not demonstrate, or even argue, that there was an absence of anti-competitive misconduct, and only asserted instead that, because the restrictive covenant can be partially enforced, it should be. The Second Department also found that it undisputed that LIMIS had a superior bargaining position, as it required Andrade to sign the employment agreement as a prerequisite to being hired, and it refused to negotiate the relevant restrictive covenant.

Posted by MMcCann

What Happens if Your Business Partner Goes Rogue?

Litigation

How many times have you said to yourself that your business partner is a close personal friend and, as such, you have absolutely no use for an Operating Agreement? You’ve started the business, it’s gotten off to a great start, so why do you need to waste precious dollars on legal fees in preparing a detailed Operating Agreement that outlines how decisions are to be made?  The mistake, which isn’t always obvious, is that you are trusting years of friendship and believing that the relationship with your co-member(s) in the LLC is of a personal nature, rather than a business one.

Suppose James and Jane are members of a newly formed New York LLC who felt that preparing an Operating Agreement would be extraneous, given their long-lasting friendship.  One day, while James is enjoying an afternoon stroll through the downtown area, he happens upon a vacant storefront that he believes would be perfect for the LLC’s business.  Thinking that he has to act quickly to take advantage of the opportunity, he hastily signs a lease on behalf of the LLC without first consulting Jane.  After learning of what James has done, Jane believes that this particular storefront won’t generate nearly the amount of foot traffic necessary to make this investment viable and strongly disagrees with this action.  As they didn’t have an Operating Agreement in place that could have, among other things, mandated that any material decisions require the unanimous consent of both members, Jane and the LLC are now bound by James’ unilateral decision.

While not every state requires that members of an LLC enter into a written Operating Agreement, New York does, in fact, require members of an LLC to do so.  Section 417(a) of the New York Limited Liability Company Law requires that “members of a limited liability company shall adopt a written operating agreement that contains any provisions not inconsistent with law or its articles of organization relating to (i) the business of the limited liability company, (ii) the conduct of its affairs and (iii) the rights, powers, preferences, limitations or responsibilities of its members, managers, employees or agents, as the case may be.”

Naturally, the consequences for failing to comply with this statute are entirely unclear, but if partners in an LLC don’t address how their business is to be conducted in a written agreement, it’s only a matter of when, not if, they will reach an impasse such as that described in the hypothetical situation above.  In addition to clearly defining the business as being separate from the personal assets of its member(s) from a legal perspective and detailing what happens upon the death or disability of one or more members, the Operating Agreement can help avoid expensive, time-consuming and resource-draining litigation that can drastically impact a company and its owners.

If you have any questions about Operating Agreements, corporate or LLC governance, or any other questions pertaining to the administration of your business, please feel free to contact me at KLawrence@swc-law.com or (516) 228-1300.

Posted by kLawrence

New Legislation Resulting From #MeToo Movement Affects New York State and City Employers

Litigation

With sexual harassment claims at the forefront of today’s news cycle, New York City and New York State have both recently taken legislative measures to curb the spread of sexual harassment, and also to assist employers who take the appropriate steps to mitigate problematic workplace situations. Signed into law by Mayor de Blasio on May 9, 2018, the Stop Sexual Harassment in NYC Act (the “NYC Act”) imposes stringent anti-sexual harassment requirements for all New York City employers. At the state level, the New York State Budget Bill for Fiscal Year 2019 (the “Budget”) further defines the obligations for state and city employers.

As the city’s current laws provide for the reduction or outright elimination of potential civil or punitive penalties where employers can prove that they have effective policies, programs and procedures in place and have complied with such policies, programs and procedures, these new laws give a clearer roadmap to employers who wish to protect themselves from liabilities in the event of a sexual harassment action brought against them.

New State Requirements:

Expansion of Definition of Sexual Harassment: The Budget expands the definition of sexual harassment to mean any “unwelcome sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature” if “made either explicitly or implicitly a term or condition of employment, or submission to or rejection of such conduct is used as the basis for employment decisions…or has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile or offensive work environment.” This provision takes effect on October 9, 2018.

Mandatory Arbitration Provisions Prohibited: Agreements requiring the submission of sexual harassment claims to mandatory and binding arbitration, whether contained within employment agreements or standalone agreements, shall be void (unless such clause is included within a collective bargaining agreement). This prohibition takes effect on July 11, 2018.

Confidential Settlement Agreements for Sexual Harassment Claims Without Complainant Consent Prohibited: Also taking effect on July 11, 2018 is a prohibition on state courts from approving confidential settlement agreements for sexual harassment claims, unless (i) confidentiality is the complainant’s preference, (ii) the complainant has been given 21 days to consider the confidentiality provision and (iii) the complainant is given seven days in which to revoke his or her acceptance of said confidentiality provision.

Interactive Sexual Harassment Prevention Training: All private employers with 15 or more employees must now provide sexual harassment prevention training to all New York-based employees. This training will be required for existing employees on an annual basis and it must be “interactive,” defined by the law as “participatory teaching whereby the trainee is engaged in a trainer-trainee interaction, use of audio-visuals, computers or online training program or other participatory forms of training determined by the Commission.” This requirement becomes effective on October 9, 2018.

Sexual Harassment Policies: In addition to the foregoing, effective October 9, 2018, all New York employers must adopt a written policy that must contain, at a minimum, the following:

  • A statement prohibiting sexual harassment
  • Examples of prohibited conduct that would constitute sexual harassment
  • Information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims, along with a statement that there may be additional applicable laws
  • A standard complaint form
  • The procedure for timely and confidential investigations of complaints
  • A statement informing employees of their rights of redress and available forums for adjudicating sexual harassment complaints administratively and judicially
  • A statement that sexual harassment is a form of employee misconduct, and that sanctions will be enforced against individuals engaging in sexual harassment and managers and supervisory personnel who knowingly allow such behavior to continue
  • A statement that retaliation against individuals reporting sexual harassment or who testify or assist in any proceeding is unlawful

New City Requirements:

Extension of Statute of Limitations: Individuals seeking to file a gender-based harassment claim within the New York City Commission on Human Rights will have a period of three years from the occurrence, instead of one year, in which to file a complaint before being statutorily barred from doing so. This change is effective immediately.

Interactive Training Requirements: In addition to the state-level changes described above, as of April 1, 2019, city employers will be required to conduct the sexual harassment prevention training for all newly hired employees within 90 days of the hire date for any employees (including interns) who will work more than 80 hours in a calendar year.

Poster and Information Sheet: Effective September 6, 2018, city employers must comply with new poster and information sheet distribution requirements. While this information has not yet been released, the guidelines are scheduled to be released prior to the effective date.

The above is merely a summary of the new legislative developments and is not intended to be a comprehensive analysis of every aspect of the NYC Act or the Budget, nor is it meant to be construed as legal advice for you or your business. Most employers in New York will need to review contractual provisions in existing employment agreements, update their employee handbooks (or similar internal policies), implement training programs or update existing programs to ensure compliance with these new laws.

If you have any questions regarding these provisions, please contact me by emailing KLawrence@swc-law.com or calling (516) 228-1300.

Posted by kLawrence

What to Do When Deeds Overlap

Litigation

Property owners are often confronted with situations where deed descriptions for adjoining properties overlap, meaning the legal description of one parcel overlaps with the legal description of an adjoining parcel.  This presents a circumstance in which adjoining owners can each claim title to the same portion of property.  Our office has confronted this issue in recent transactions and there are several solutions.

Analyzing the strategies from the simplest to achieve to those that are most complex, the solutions are as follows:

If both parties are in agreement, the owners may: (1) execute correction deeds by which the overlapping portion is affirmatively deeded to one owner and the descriptions for the deeds in each owner’s chain of title are corrected; or (2) the owners may execute a boundary line agreement setting forth the agreed upon legal boundary line between the owners’ adjoining parcels. These solutions avoid litigation but require the filing of the correction deeds or boundary line agreement at the County Clerk’s office, obtaining new surveys and maps, and recertification of title insurance for both properties.

In the event that the parties cannot resolve the issue with correction deeds or a boundary line agreement, the owner that has been cultivating or utilizing the overlapping portion may assert a claim of adverse possession to obtain undisputed ownership over the disputed portion under Article 5 of the New York Real Property Actions and Proceedings Law (“RPAPL”).  Article 5 requires that the asserting owner prove that it had continuous, exclusive, hostile, and open and notorious possession of the overlapping portion under a good faith claim of right for at least ten (10) years.   Alternatively, one of the owners could opt to pursue a quiet title action under Article 15 of the RPAPL, in which case the two owners would argue their respective claims to the property, after which the court would render a decision establishing conclusive title in one of the owners.  Either action may involve a potential claim against each owner’s title insurance policy.

If you find yourself in this circumstance, we are pleased to consult.

Posted by Michael Barone

Divorce and your credit

Litigation

Divorce impacts all aspects of one’s life, both directly and indirectly. One of the indirect consequences is the effect of divorce on one’s credit. This is an indirect effect as one’s credit is not impacted by marital status. There are both negative and potentially positive impacts of divorce on one’s credit.

 

Negative effects of divorce on one’s credit:

  • Failure to pay bills during a pending divorce: Often during a divorce, bills are unpaid. Sometimes this is the result of one spouse being vindictive; other times, one is unable to pay bills due to other obligations. Often the court will order a spouse to pay martial expenses; however, this does not necessarily mean that the expenses will be paid. Despite orders to pay expenses, if one spouse does not pay the bills and they are joint or in the name of the other spouse, the nonpayment will adversely affect one’s credit.
  • Post-divorce, restructuring of financial affairs: Following a divorce, generally, there is a restructuring of one’s financial affairs and this may prevent a spouse from maintaining expenses previously paid. In addition, the expenses associated with a divorce many render a spouse/ex-spouse unable to continue to maintain their expenses. Many spouses are unable to continue to maintain the expenses that they maintained pre-divorce, and others simply become bankrupt post-divorce. In addition, if bills are unpaid during a divorce, it is very difficult to automatically bring them current post-divorce. This often occurs with a delinquency on one’s mortgage. As such, one’s credit will negatively suffer.
  • Spouse’s failure to pay expenses pursuant to Stipulation/Judgment of Divorce: In addition, many divorce agreements/judgments require one spouse to continue to pay the expenses of another. However, this is an agreement between the parties, and the person whose name the debt is in must continue to ensure that the payment is made regardless as to whether or not the spouse is fulfilling their obligation. Failure to do so will result in an adverse impact on one’s credit.

 

Positive effects of divorce on one’s credit:

  • Freedom from spouse with bad credit: Sometimes a person with good credit marries a person with bad credit and the union adversely impacts the credit of both. For some, divorce may mean freedom from a spouse who continually destroys the parties’ credit, both individually and as a couple.
  • Reassessment of expenses, and post-divorce adjustments to lifestyle: Many couples live beyond their means, and the stress and hardship of doing so impacts the marriage and leads to divorce. Splitting the liabilities in some instances will reduce the stress on the spouses and may make the payment more manageable. Also, post-divorce, many reassess their lifestyle and make appropriate adjustments to live within their means. This would be a positive aspect of divorce on one’s credit.
  • More access to money to pay expenses: Divorce at times gives a less-monied spouse access to more money than they had during the viability of the marriage. This gives rise to freedom to conduct one’s financial affairs and can have a positive impact on one’s credit.

Posted by Elaine Colavito

From Government to Private Practice – The Other Side of the Table

Litigation

For the past three years I had the honor of working at the New York City Law Department in their Family Court Division.  I was assigned to Bronx Family Court where I handled the investigation and prosecution of juvenile delinquency cases.  As I prepared to enter private practice, I wondered about how I would view the role of the prosecutor from the other side of the table, and how my training prepared me to become an effective civil litigator and criminal defense attorney.  I was eager to apply my skills to the wide array of matters handled in a general practice law firm.

In the Bronx, I was faced with a diverse set of cases. The majority of my work focused on assault, grand larceny, robbery, domestic violence, and sex related offenses.  These were very serious matters which involved important legal issues.  Some of the issues I encountered on a daily basis included whether a youth was properly stopped, searched, and arrested by law enforcement, and whether law enforcement properly recovered evidence or obtained a statement.  Moreover, I was charged with analyzing whether or not there was sufficient and credible evidence to prove a youth’s guilt beyond a reasonable doubt, and when necessary, strategize and prepare the case for fact-finding.  The disposition of these cases had a profound effect on the lives of the court involved youth, the victim, and the community at large.

While it was not uncommon for me to negotiate a plea bargain, a good portion of my cases proceeded to suppression hearings and trial.  I was responsible for preparing witnesses to testify on direct and cross examination and entering exhibits into evidence.  Witnesses in Family Court included uniformed and undercover police officers, victims and witnesses as young as five years old, family members of the accused and their victims, medical professionals, first responders, as well as non-party bystanders, many of whom wanted to be anywhere but inside a courtroom.  Evidentiary exhibits included surveillance videos, weapons, drugs, photos, and DNA evidence.  Ensuring the witnesses appearance was never a guarantee and preparing them for the intricacies of direct and cross-examination was never a routine process.  Success required thorough preparation and critical thinking about all of the issues surrounding the case.

The exposure to a diverse set of legal issues, evidence, and procedures have laid a solid foundation for approaching the complexities of civil litigation and criminal defense.  Whether it has been collaborating on a breach of contract appellate brief, persuasively drafting memoranda of law to the Court following trial, representing clients facing assault and DWI charges, or advising municipalities on the constitutionality of local laws, I have been able to confront varied and difficult matters while advocating for specific client objectives.  As I transition to private practice, I am excited to apply my skills and experience to best serve the unique needs of my clients.

Posted by Joshua Brookstein

Striking a Jury Demand in a Mechanic’s Lien Foreclosure Action

Litigation

Mechanic’s lien foreclosure actions are regularly filed by general contractors seeking to simultaneously: (1) obtain equitable relief in the form of a foreclosure on a mechanic’s lien filed in connection with construction work performed on real property, and (2) obtain legal relief in the form of monetary damages for breach of contract and quantum meruit. Under such circumstances, in which a contractor pursues both equitable and legal relief within the same action, the contractor irrevocably waives its right to a jury trial on all of its claims. As the case law underscores, if a contractor seeks both equitable and legal relief within a mechanic’s lien foreclosure action, a demand for a trial by jury made in conjunction with filing a Note of Issue, is likely to be stricken by the court in favor of a bench trial on all claims.

Under New York law, “[i]t is well settled that by ‘deliberately joining legal and equitable causes of action arising out of the same transaction,’ a party waives its right to a trial by jury.” Haber v. Cohen, 25 Misc. 3d 1216(A) 906 (Sup. Ct., Kings Co. 2009) (quoting Mirasola v. Gilman, 104 A.D.2d 932 (2d Dep’t 1984)) aff’d, 74 A.D.3d 1282 (2d Dep’t 2010). Moreover, this well settled doctrine has been articulated within the specific context of a mechanic’s lien foreclosure action. See, e.g., Edward Joy Co. v. McGuire & Bennett, Inc., 221 A.D.2d 891, 892 (3d Dep’t 1995) (“[B]y joining [a] legal [cause of action for breach of contract] and [an] equitable cause of action [to foreclose on a mechanic’s lien] arising out of the same transaction [i.e., a construction project], plaintiff waived its right to a trial by jury.”).

Indeed, the Second Department has made clear that “[u]nder established principles, the joinder of claims for equitable and legal relief amounts to a waiver of the right to demand a jury trial.” Magill v. Dutchess Bank & Trust Co., 150 A.D.2d 531, 532 (2d Dep’t 1989); see also, e.g., Petra Cablevision Corp. v. Teleprompter Corp., 49 A.D.2d 888, 888 (2d Dep’t 1975) (“The joinder by plaintiff of legal and equitable claims constituted a waiver of its right to a trial by jury.”).

Accordingly, when confronted with circumstances in which a party joins claims for equitable and legal relief arising out of the same action, the Second Department has demonstrated a tendency to affirm a lower court’s decision to strike a jury demand. See, e.g., Anethesia Assocs. of Mount Kisco LLP v. N. Westchester Hosp. Ctr., 59 A.D.3d 481 (2d Dep’t 2009) (affirming striking of jury demand when the plaintiff joined claims for equitable and legal relief); Ayromylooi v. Staten Island Univ. Hosp., 7 A.D.3d 475 (2d Dep’t 2004) (same); Whipple v. Trail Props., Inc., 261 A.D.2d 470 (2d Dep’t 1999) (same). Similarly, the Second Department tends to reverse a lower court’s decision to deny a motion to strike a jury demand under such circumstances. See, e.g., Bryant v. Broadcast Music, Inc., 88 A.D.3d 631 (2d Dep’t 2011) (reversing denial of motion to strike jury demand when the plaintiff joined claims for equitable and legal relief); Yi v. Marcy Realty Co., 291 A.D.2d 368 (2d Dep’t 2002) (same); Tanenbaum v. Anchor Sav. Bank, 95 A.D.2d 827 (2d Dep’t 1983) (same).

Moreover, “[o]nce the right to a jury trial has been intentionally lost by joining legal and equitable claims, any subsequent dismissal, settlement or withdrawal of the equitable claim(s) will not revive the right to jury trial.” Bryant, 88 A.D.3d at 632 (quoting Anethesia Assocs. of Mount Kisco LLP, 59 A.D.3d at 482); see also, e.g., Whipple, 261 A.D.2d at 470 (“The subsequent amendment of the complaint to eliminate the equitable cause of action and demand for equitable relief did not revive that right [to a jury trial].”); Mirasola, 104 A.D.2d at 932 (“The subsequent removal of the equitable claims from the case through a partial settlement did not revive that right [to a jury trial].”); Sepinski v. Bergstol, 81 A.D.2d 860, 861 (2d Dep’t 1981) (“Plaintiffs who make an intentional choice to join equitable and legal causes based upon the same transaction cannot be relieved from their waiver of the right to a trial by jury.”).

In conclusion, a contractor prosecuting a mechanic’s lien foreclosure action in New York State Supreme Court seeking both equitable and legal claims irrevocably forfeits its right to a trial by jury, notwithstanding any subsequent dismissal, settlement or withdrawal of the equitable claims.

Accordingly, based upon the prevailing precedent in the Second Department, a court is likely to strike the contractor’s jury demand and order a bench trial on all claims.

For more information on the mechanic’s lien foreclosure process or to better understand your rights under New York State lien and construction law with regards to home improvement and/or commercial construction projects, please contact Adam H. Koblenz.

*The author acknowledges Steven Alizio, Jr., J.D. Candidate 2016, for his contribution to this article.

Posted by Adam H. Koblenz

Supreme Court Holds that States Must Recognize Lawful Same-Sex Marriages

Litigation

In Obergefell v. Hodges, decided on June 26, 2015, 2015 WL 2473451, in a 5-4 decision, the United States Supreme Court held that states must recognize lawful same-sex marriages performed in other states. In rendering its decision, Justice Kennedy writing for the majority opinion reasoned that the fundamental liberties protected by the Fourteenth Amendment’s Due Process Clause extend to certain personal choice central to individual dignity and autonomy, including intimate choices central to identifying personal identity and beliefs.  Further, the decision noted that the Court has long held that the right to marry is protected by the Constitution and that four principals and traditions demonstrate that the reasons a marriage is fundamental under the Constitution apply with equal force to same sex couples: (1) the right to personal choice regarding marriage is inherent in the concept of individual autonomy; (2) the right to marry  supports a two-person union unlike any other in its importance to the committed individuals; (3) the right to marry safeguards children and families and thus draws meaning from related rights of childrearing, procreation, and education; and (4) this Court’s cases and the Nation’s traditions make clear that marriage is a keystone of the Nation’s social order.

Legal implications of marriage

Although same sex marriage has been legal in New York since 2011, the Supreme Court’s recent decision leads to an evaluation of the implications, for all couples alike.

When a person marries, it is typically a decision made out of love and affection for another individual (as it should be).  However, often not understood or considered are the legal implications of such a decision.  Marriage is a legal binding contract, which vests certain enforceable rights and responsibilities in spouses.  Typically, when spouses are at the point of understanding what rights and responsibilities they have.  It is often when they are divorcing when many spouses look back and wish they would have taken the time to understand the implications.

Like any contract one is considering, is important to understand the marriage contract.  To name a few implications of marriage, marriage impacts property rights. Marriage impacts support obligations.  Marriage impacts responsibility for debts. Marriage impacts parental rights. Marriage impacts health insurance.  Marriage impacts tax filing status.  Marriage impacts inheritance rights.  Marriage impacts immigration filings.  Marriage impacts who can make legal decisions for you.  Marriage impacts bankruptcy.

Matrimonial law is not a one-size fits all area, and each couples’ situation requires specific evaluation before entering into a marriage.  For an individual analysis and consultation, please contact us to discuss your specific matrimonial law needs.  Our matrimonial services include negotiating and drafting pre- and post-nuptial agreements, negotiating and drafting separation agreements for uncontested and contested divorces, handling divorce trials from inception through conclusion, counseling and advising clients in matters concerning separation and divorce, custody and visitation matters, spousal maintenance, child support and equitable distribution.

Posted by Elaine Colavito

Second Department Issues Ruling in Adverse Possession Case

Litigation

Case: Wright v. Sokoloff, 110 A.D.3d 989 (2nd Dept., October 23, 2013)

In the recent decision of Wright v. Sokoloff, 110 A.D.3d 989 (2nd Dept., October 23, 2013), the Appellate Division, Second Department, clarified the appropriate reading of NY RPAPL § 543(1), which states that “[n]otwithstanding any other provision of this article, the existence of de [minimis] non-structural encroachments including, but not limited to, fences, hedges, shrubbery, plantings, sheds and non-structural walls, shall be deemed to be permissive and non-adverse.” In reaching its holding, the Second Department explained that under RPAPL 543(1), non-structural encroachments, such as the ones provided in a non-exhaustive list in the statute, are permissive so long as they are de minimis, but upon a showing that such encroachments are not de minimis, those encroachments are adverse. 110 A.D.3d at 990-91.

In Wright v. Sokoloff, the plaintiff-petitioner owned property located at 237 Gin Lane in Southhampton. According to the plaintiff’s deed, the plaintiff was entitled to “a right of way for ingress and egress, and for all other purposes” over a 30-foot-wide strip of land running from Gin Lane to the plaintiff’s lot. Id. at 989. Part of this right of way was located on the defendant-respondent’s lot at 241 Gin Lane. In July 1999, the former owners of defendant’s lot planted an eight-foot-wide hedge on the portion of the right-of-way located on defendant’s lot. According to the plaintiff, he immediately objected and repeatedly requested that the former owner remove the hedge, which the owner refused to do. The defendants, who purchased the property in October 2006, also refused plaintiff’s requests to remove the hedge. Id. at 989.

Plaintiff commenced an action in July 2010 seeking to direct the defendants “to remove the hedges, tress, plantings, structures, and all impediments substantially and unreasonably interfering with [the plaintiff's] right of way.” The Supreme Court granted the defendants’ cross motion for summary judgment and dismissed the complaint (decision available here: WrightvSokoloff). Id. at 990.

On review, the Second Department reversed the lower court on the basis that the defendants failed to establish that the hedge did not in fact pose a substantial interference with the plaintiff’s right of way, nor did the defendants sufficiently prove that plaintiff’s action was time-barred by extinguishment of the right-of-way by means of adverse possession due to the language of RPAPL 543(1). Id. at 990. Under New York law, adverse possession occurs when there is actual, exclusive, hostile, open and notorious possession of property under claim of right for a continuous statutory period of at least ten years. See Estate of Becker v. Murtagh, 19 N.Y.3d 75, 80-81 (2012); NY RPAPL § 521. RPAPL 543(1), the Second Department explained, provides that the presence of a “de [minimis] non-structural encroachment” is permissive and, therefore, not adverse. Because the defendants failed to argue that the hedges were more than a de minimis non-structural encroachment, and therefore adverse, the Second Department found the plaintiff’s argument that the shrubs were permissive and non-adverse to be a triable issue of fact. See 110 A.D.3d at 990.

Despite recognizing the plaintiff’s argument of a triable issue of fact, the court rejected the plaintiff’s theory. According to the plaintiff, any of the non-structural encroachments provided in the statute’s non-exhaustive list are “de minimis non-structural encroachments” and, therefore, are inherently permissive regardless of size. Id. at 990. The Second Department, however, found that such an interpretation would render the use of “de minimis” superfluous. Presuming that all statute clauses serve a purpose, the Second Department rejected plaintiff’s interpretation and instead explained in dictum that in such cases in which RPAPL 543(1) is relevant, any of the non-structural encroachments at issue must be determined to be de minimis before being declared permissive. Id. at 991.

The author acknowledges Michael Barone, Jr., J.D. Candidate 2014, for his contribution to this article.

Posted by Adam H. Koblenz