A Wee Dram for Naught

In his 1785 poem Scotch Drink, the great Robert Burns urged displacement of lawyers by alternative dispute resolution in the form of alcoholic beverage:

When neibors anger at a plea,

An’ just as wud as wud can be,

How easy can the barley brie

Cement the quarrel!

It’s aye the cheapest lawyer’s fee,

To taste the barrel

 It didn’t work out that well for the plaintiff in Esposito v Rail Bar & Grill Corp, decided 2/20/2019 by the Appellate Division, Second Department.

Espositio got into a verbal disagreement with Kral in the defendant bar. Espositio then bought Kral a drink. It seems that didn’t patch things up, because “tensions . . . erupted again” leading to an altercation with Kral and another person.

Espositio sued the bar, claiming Dram Shop Act violations because Kral was too intoxicated to be served.

Alas, not only did Espoito’s generosity fail to “cement the quarrel”, it also put him out of court, since “plaintiff’s procurement of the allegedly unlawful drink for Karl precludes the plaintiff from recovering under the Dram Shop Act.”

NY High Court Draws Careful Distinction Between 6 Months to Re-File after Non-Merits Dismissal and Relation Back of Claims in Amended Complaint; Warns that it Cannot Review Issues Not Addressed at Nisi Prius

Precedents established in personal injury cases loomed large in a Court of Appeals decision arising from a dispute involving mortgage backed securities.

If the original complaint gives sufficient notice, CPLR 203(f) uses the date of interposition of the original claims to calculate the statute of limitation for claims contained in a later amendment. Under CPLR 205(a), if an otherwise timely action is dismissed for non-merits reasons, a new action commenced within 6 months of the dismissal will be deemed timely. The Court reiterated that these provisions are not interchangeable.

In Goldberg v Camp Mikan-Recro, 42 NY2d 1029 [1977], the Court held that a wrongful death claim asserted in an amended complaint could not relate back to the original complaint that was brought by the decedent’s father solely in his individual capacity. The Court held that since the original suit was brought without capacity to sue for the decedent’s injuries, there was no pre-existing action to which the claims in the amended complaint could relate back.

In George v Mt. Sinai Hosp., 47 NY2d 170 [1979] and Carrick v Cent. Gen. Hosp., 51 NY2d 242 [1980], the Court established that a dismissal of an action for the same lack of capacity was a non-merits dismissal, so that an action commenced within six months of the dismissal by a properly appointed representative was timely.

So, when a trustee brought an untimely action for breach of representations and warrantees against the sponsor of some mortgage backed securities, the trustee argued that under CPLR 203(f) it should relate back to a certificate holder’s previously filed action. No dice says the Court. Under the transaction documents, the certificate holder was subject to a no-action clause, so that there was no valid pre-existing action to relate back to.

In a chilling reminder to all of us, the Court refused to consider the alternative argument for a toll under CPLR 205(a), because the trustee never raised it below. The sponsor said in a footnote in its motion papers that 205(a) wouldn’t apply should the trustee raise it. This did not help the trustee on appeal; the Court says this obligated the trustee to address it. The Court reminds us that “[w]hile in some circumstances the Appellate Division has interest of justice jurisdiction to review an issue raised for the first time on appeal, this Court “ha[s] no power to review either the Appellate Division’s exercise of its discretion to reach that issue, or the issue itself” U.S. Bank Natl. Assn. v DLJ Mtge. Capital, Inc., 2019 NY Slip Op 01168 (2/19/2019)

In a separate case decided between the same parties but apparently arising from a different transaction, the trustee’s original action was dismissed for failure to comply with a contractual notice to cure or repurchase condition precedent.  CPLR 205(a) saved the day for the trustee. The statute of limitations did not bar a second action because the trustee was able to comply with the provision and commence a new action within six months. U.S. Bank Natl. Assn. v DLJ Mtge. Capital, Inc.,  2019 NY Slip Op 01169 (2/19/2019). 

NY AD 1 Takes Dim View of Doctor Non-compete

A medical group, an employed physician and the physician’s new group wound up in court arguing about restrictive covenants in an employment contract. The old group asked the court to stop the doctor from violating the restrictions, and to order the  new group not to interfere, while the lawsuit progressed.

The Appellate Division, First Department, said the old employer was not entitled to the preliminary injunction. The court said that non-compete clauses will not be enforced against individual doctors unless it is necessary for the protection against misappropriation of the employer’s trade secrets or of confidential customer lists, or protection from competition by a former employee whose services are unique or extraordinary. 

While the doctor was probably happy to hear that the court would not stop her from working for the new practice,  the court based it decision on a finding that her ob/gyn services were not so unique or extraordinary as to give her an unfair advantage.

Harris v. Patients Med, P.C. (Feb 7, 2019).