Welcome to the Suffolk Lawyer’s inaugural column focused on Suffolk County’s Commercial Division. Although the column will regularly address topics of particular interest to the commercial litigator, it will also be useful to the general litigator who may have occasion to interact with some of the commercial-oriented topics. This month, we will review the history of the Commercial Division and provide an overview of the rules which govern practice there.
History of the Commercial Division
Fifteen years ago, the Supreme Court established four Commercial Parts on an experimental basis in an effort to ascertain whether it was possible to improve the efficiency and quality in which the courts addressed commercial matters. ((A Brief History, www.nycourts.gov/courts/comdiv/history.shtml.)) In light of the positive feedback provided by both the judiciary and the bar, Chief Judge Kaye established the Commercial Division on a statewide basis. To date, the Commercial Division encompasses ten jurisdictions statewide, including Suffolk County. In Suffolk County, the Commercial Division is staffed by Justice Emerson and Justice Pines with the assistance of their respective Principal Law Clerks, Joan Hannon and Caren Loguercio. Kathryn Coward serves as the Commercial Division Court Attorney.
Is it a Commercial Matter?
There are specific jurisdictional thresholds for adjudication in the Commercial Division. If an action seeks equitable or declaratory relief, or if Suffolk County’s $50,000 monetary threshold is achieved (exclusive of punitive damages, interest, costs, disbursements and counsel fees), (( 202.70(a).)) the Commercial Division is appropriate when the principal claim involves: (1) breach of contract or fiduciary duty, fraud, business torts, unfair competition, or a common law or statutory violation which relates to business dealings; (2) transactions governed by the UCC; (3) transactions involving commercial real property (excluding actions for the payment of rent only); (4) business transactions involving commercial banks and other financial institutions; (5) internal affairs of business organizations; (6) malpractice by accountants or actuaries, and legal malpractice arising out of representation in a commercial matter; (7) environmental insurance coverage; and (8) commercial insurance coverage. ((202.70(b)(1-3) and (6-10).)) Further, four categories of cases qualify for commercial designation without consideration of the monetary threshold: (1) shareholder derivative actions; (2) commercial class actions; (3) dissolution matters; and (4) applications related to arbitration awards pursuant to Article 75 involving any of the foregoing commercial issues ((202.70(b)(4), (5), (11) and (12).)). Six categories of cases are deemed per se non-commercial matters and will not be heard in the Commercial Division even when the monetary threshold is met: (1) suits to collect professional fees; (2) declaratory judgment actions with respect to personal injury or property damage; (3) residential real estate disputes and commercial real estate disputes for the payment of rent only; (4) judgment enforcement proceedings; (5) an insurer’s first party insurance claim to collect premiums or rescind non-commercial policies; and (6) attorney malpractice actions which do not relate to representation in a commercial matter. ((202.70(c)(1-6).))
Commercial Division Designation
Assuming the claim meets one of the foregoing qualifying criteria, a party seeking assignment to the Commercial Division shall indicate as such on the RJI, prepare an affirmation justifying Commercial Division designation and annex a copy of the pleadings. ((202.70(d).)) In the event that a matter is assigned to a non-commercial part because the filing party did not designate the case as commercial on the RJI, any other party may write to Administrative Judge Leis (within 10 days after receipt of a copy of the RJI) seeking a transfer of the case into the Commercial Division. ((202.70(e).)) If the assigned commercial Justice determines that the matter does not fall within the Commercial Division’s jurisdiction, the matter may be transferred to a non-commercial part of the Supreme Court. In that event, any party aggrieved by the transfer to a non-commercial part may send a letter seeking review of the same to Administrative Judge Leis within 10 days of receipt of the designation of the case to a non-commercial part. ((202.70(f).))
Litigating in the Commercial Division
Once the matter is qualified, the litigation will be subject to more than 30 Rules of Practice for the Commercial Division. Generally, Part 202 rules which govern litigation practice generally will also apply in the Commercial Division, with two notable exceptions: Commercial Division Rules 7 through 15 supersede 202.12 (relating to the Preliminary Conference) and Commercial Division Rules 16 through 24 supersede 202.8 (governing motion practice). ((202.70(g).))
Counsel will be directed to appear at a Preliminary Conference within 45 days from the date that the matter is assigned to the Commercial Division. ((Commercial Division Rule 7.)) But counsel’s preparation for a Commercial Division Preliminary Conference must begin well in advance; Commercial Division Rule 8, entitled Consultation Prior to Preliminary and Compliance Conferences, dictates as follows:
(a) Counsel for all parties shall consult prior to a preliminary or compliance conference about (i) resolution of the case, in whole or in part; (ii) discovery and any other issues to be discussed at the conference; and (iii) the use of alternate dispute resolution to resolve all or some issues in the litigation. Counsel shall make a good faith effort to reach agreement on these matters in advance of the conference.
(b) Prior to the preliminary conference, counsel shall confer with regard to anticipated electronic discovery issues. Such issues shall be addressed with the court at the preliminary conference and shall include but not be limited to (i) implementation of a data preservation plan; (ii) identification of relevant data; (iii) the scope, extent, and form of production; (iv) anticipated cost of data recovery and proposed initial allocation of such cost; (v) disclosure of the programs and manner in which the data is maintained; (vi) identification of computer system(s) utilized; (vii) identification of the individual(s) responsible for data preservation; (viii) confidentiality and privilege issues; and (ix) designation of experts. ((Commercial Division Rule 8.))
A cursory review of the foregoing confirms that a prepared commercial litigator must have a firm grasp of a plethora of issues which may arise in the particular matter so that the same can be discussed with an adversary prior to the PC. Further, in light of the broad scope of electronic discovery issues encompassed within subdivision “b”, it will be necessary for counsel to consult with the client’s IT professional and, depending upon the complexity of the electronic discovery issues at bar, possibly engage a third-party computer consultant to coordinate and supervise Rule 8(b) disclosure and advise counsel regarding the same. Additionally, prior to the PC, if you believe that discovery may encompass potentially confidential material (e.g., trade secrets), it is best to circulate and negotiate a proposed Confidentiality Stipulation and Order so that the same may be submitted to the Court at the PC to be “So Ordered”.
There are likewise Division-specific rules related to motion practice. Rule 19 provides that an order to show cause may only be utilized to initiate a motion when there is a “genuine urgency (e.g., applications for provisional relief), a stay is required”, or a particular statute requires the movant to proceed by order to show cause. Rule 24 requires pre-motion conferences (except in limited, particularly delineated instances outlined in Rule 24(b)). As a pre-cursor to filing a motion, the proposed movant must advise the Court, in a two page or less letter, regarding the substance of the disputed issue. In response to the proposed movant’s letter, the Court will schedule a telephone or in-court conference with counsel; if the issue cannot be resolved, a briefing schedule will be ordered. Finally, Rules 25 through 33 concern settlement and pre-trial conferences, as well as trial procedure in the Commercial Division.
In light of the Court’s expertise with respect to many of the issues which are litigated in the Commercial Division, coupled with the Division-specific rules which govern practice, counsel will find that it is a pleasure to practice in the Commercial Division because the matters are managed efficiently by an experienced Bench.