New Criminal Tax Laws

NOVEMBER/DECEMBER 2009 VOL. 81 | NO. 9 JournalNEW YORK STATE BAR ASSOCIATION

Taking Aim at Tax Evaders Also in this Issue Construction Contract by William Comiskey Assignment Copyright Litigation Did the Appellate Odds Change in 2008?

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November/December 2009

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BOARD OF EDITORS EDITOR-IN-CHIEF David C. Wilkes Tarrytown e-mail: [email protected] Mary Grace Conneely Monticello Philip H. Dixon Albany Elissa D. Hecker Irvington Jonathan Lippman New York City Eileen D. Millett New York City Gary A. Munneke White Plains Thomas E. Myers Syracuse John B. Nesbitt Lyons Gary D. Spivey Colorado Springs, Colorado Sharon L. Wick Buffalo MANAGING EDITOR Daniel J. McMahon Albany e-mail: [email protected] ASSOCIATE EDITOR Philip C. Weis Oceanside

PUBLISHER Patricia K. Bucklin Executive Director

NYSBA PRODUCTION STAFF ASSISTANT EDITOR I value my NYSBA membership for its wide variety of reliable information Joan Fucillo DESIGN resources — from its online publications, to its listserves, to its case summary Lori Herzing and alert services, and its NYSBA T-News — all of which I use regularly. Erin Corcoran EDITORIAL OFFICES One Elk Street Tracey Salmon-Smith Albany, NY 12207 NYSBA member since 1991 (518) 463-3200 FAX (518) 463-8844 www.nysba.org

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Thank you for your membership support. EUGENE C. GERHART (1912 – 2007) Editor-in-Chief, 1961–1998 CONTENTS NOVEMBER/DECEMBER 2009

NEW CRIMINAL TAX LAWS Taking Aim at Tax Evaders BY WILLIAM COMISKEY 10

DEPARTMENTS 5 President’s Message 8 CLE Seminar Schedule 21 Burden of Proof 25 Legal Implications of the Assignment of BY DAVID PAUL HOROWITZ a Construction Contract 43 Tax Alert BY STEVEN C. BENNETT BY ROBERT E. HARRISON 46 Presentation Skills For Lawyers 30 Statutory Damages in Copyright BY ELLIOTT WILCOX Litigation 48 Index to Articles 2009 BY ANDREW BERGER 50 Index to Authors 2009 52 Language Tips 35 Update: Did the Appellate Odds Change BY GERTRUDE BLOCK in 2008? 53 New Members Welcomed Appellate Statistics in State and 60 Index to Advertisers Federal Courts 60 Classified Notices BY BENTLEY KASSAL 63 2009–2010 Officers 39 Which Actions “Affect” Real Property 64 The Legal Writer Under CPLR 6501? BY GERALD LEBOVITS BY JOHN R. HIGGITT

CARTOONS © CARTOONRESOURCE.COM

The Journal welcomes articles from members of the legal profession on subjects of interest to New York State lawyers. Views expressed in articles or letters published are the authors’ only and are not to be attributed to the Journal, its editors or the Association unless expressly so stated. Authors are responsible for the correctness of all citations and quotations. Contact the editor-in-chief or managing editor for submission guidelines. Material accepted by the Association may be published or made available through print, film, electronically and/or other media. Copyright © 2009 by the New York State Bar Association. The Journal ((ISSN 1529-3769 (print), ISSN 1934-2020 (online)), official publication of the New York State Bar Association, One Elk Street, Albany, NY 12207, is issued nine times each year, as follows: January, February, March/April, May, June, July/ August, September, October, November/December. Single copies $20. Periodical postage paid at Albany, NY and additional mailing offices. POSTMASTER: Send address changes per USPS edict to: One Elk Street, Albany, NY 12207.

NYSBA Journal | November/December 2009 | 3

PRESIDENT’S MESSAGE MICHAEL E. GETNICK The Good We Do: It’s Time for a Pat on the Back

recent Gallup poll indicated that benefits of pro bono service, and shared only 25% of Americans have a those stories with media outlets. We Apositive image of lawyers.1 It reached out to many mayors and state gets worse. On a recently aired episode leaders, asking them to issue proclama- of Family Feud, the host asked the contes- tions declaring October 25–31, 2009, tants to name a profession whose mem- as National Pro Bono Week in their bers are least likely to get into heaven. respective cities and jurisdictions. We Of 100 people surveyed, 43 answered received proclamations from various lawyers – other answers included politi- locations, including Albany, Buffalo, cians, pimps, strippers and drug-dealers. Binghamton, Utica, and Ithaca, to name Ouch! It is no surprise that boosting the a few, and Attorney General Andrew image of the profession is among the top Cuomo issued a citation commending priorities of bar associations across the the State Bar for our efforts to promote nation, including ours. pro bono service. We participated in a Recognizing the Good You Do It is essential that the public have con- kick-off celebration, graciously hosted If you are one of our many members who fidence in members of the bar and our by Chief Judge Jonathan Lippman and do pro bono, we want to recognize you justice system. Improving our image, the Court of Appeals. Local bar associa- for the good that you do. Last year alone, especially in a culture where lawyer tions all across the state joined us in cel- we welcomed more than 1,300 of our jokes abound, is a challenge, but not ebrating pro bono by hosting clinics for members into the ranks of our Empire because of the lack of good things to talk the public, CLE programs for pro bono State Counsel program for providing 50 about. For nearly 20 years, our motto volunteers, and awards ceremonies. It or more hours of free legal services to has been “Do the public good. Volunteer was a wonderful celebration of what the poor. We are now accepting applica- for pro bono.” And our members have lawyers do – not just for one week, but tions for our 2009 class of Empire State answered the call. Every day, in cities all year long. Counsel. I strongly encourage you to and towns and villages across New apply. It is very simple: just affirm for us York and beyond, thousands of lawyers Get Involved; Share Your Story the 50 or more hours of pro bono service are providing free legal assistance to the I felt proud and honored to be a part you volunteered during the calendar poor. They are helping people save their of this campaign recognizing our pro- year of 2009. You can find more informa- homes from foreclosure, secure desper- fession for the hundreds of thousands tion at www.nysba.org/probono. Please ately needed governmental benefits and of hours of free services that lawyers help us reach our goal of more than 3,000 seek refuge from abusers. I know of no provide. So many of you shared your Empire State Counsel inductees. other profession that gives so freely of pro bono stories, which indicate that the its time and expertise. experience is often just as rewarding for Who We Are In an effort to spread the word about the attorney as it is for the client. Pro By doing pro bono, you not only pro- our members’ good deeds, while at the bono service – helping our most vulnera- vide a tremendous service to the pub- same time giving them a much-deserved ble at the darkest time in their lives – is at lic, but you also take part in a reward- pat on the back, we launched “The Good the very heart of why most of us joined ing professional experience that serves We Do Campaign” to promote the good this honorable profession. I urge our pro to boost the image of our profession. that lawyers do. Our campaign coincid- bono volunteers to keep it up and, if On behalf of the State Bar, thank you ed with the first-ever National Pro Bono you have not yet gotten involved in pro for the good that you do. ■ Week, October 25–31, which recognized bono service, please consider volunteer- attorneys’ pro bono work, encouraged ing your time. Now, more than ever, the 1. Only three industries received lower rankings: real estate, automobile, and oil and gas. pro bono volunteerism and raised com- need is great. This campaign is ongoing, munity awareness of pro bono service. so please continue to share your good Toward this end, we issued a statewide news stories. Many of the stories we MICHAEL E. GETNICK can be reached at radio ad campaign touting pro bono received can be found on our Web site [email protected]. service. We solicited good news stories at www.nysba.org/probono and on our from lawyers and their clients about the new blog, www.thegoodwedony.org.

NYSBA Journal | November/December 2009 | 5 There are millions of reasons to do Pro Bono. (Here are some.)

Each year in communities across New York State, indigent people face literally millions of civil legal matters without assistance. Women seek protection from an abusive spouse. Children are denied public benefits. Families lose their homes. All without benefit of legal counsel. They need your help.

If every attorney volunteered at least 20 hours a year and made a financial contribution to a legal aid or pro bono program, we could make a difference. Please give your time and share your talent.

Call the New York State Bar Association today at 518-487-5640 or go to www.nysba.org/probono to learn about pro bono opportunities.

6 | November/December 2009 | NYSBA Journal

NYSBACLE Tentative Schedule of Fall Programs (Subject to Change)

The New York State Bar Association Has Been Certified by the New York State Continuing Legal Education Board as an Accredited Provider of Continuing Legal Education in the State of New York.

The Contested Accounting Proceeding in Representing Licensed Professionals Surrogate’s Court: The Law and Techniques (9:00 am – 1:00 pm) You Should Know November 19 Syracuse (9:00 am – 1:00 pm) December 3 Long Island November 17 Buffalo (1:00 pm – 5:00 pm) November 20 Westchester †Corporate Counsel Institute December 1 Syracuse (two-day program) December 3 Albany November 19–20 New York City December 8 Long Island December 10 New York City †Seventh Annual Sophisticated Trusts and Estates December 11 Rochester Institute (two-day program) Ethics and Professionalism November 19–20 New York City (9:00 am – 12:35 pm) November 17 Long Island Foreclosure and Other Receiverships November 20 Westchester (9:00 am – 11:45 am) December 1 Buffalo November 20 Rochester December 8 Rochester Handling Tough Issues in a Plaintiff’s Personal Practical Skills: Civil Practice – The Trial Injury Case November 18 Albany; Buffalo; Long Island; November 20 Albany; Long Island New York City; Syracuse; Westchester No Fault – What You Need to Know in New York November 20 New York City Protecting Your Practice – Risk Management for the Solo and Small Firm (1:00 pm – 5:00 pm) Construction Site Accidents November 18 Buffalo; New York City November 20 Buffalo December 4 Albany; Long Island Medical Malpractice December 11 New York City; Syracuse November 18 Rochester November 19 Albany; New York City Practicing Matrimonial & Family Law in Chaotic Economic Times (9:00 am – 12:45 pm) †Update 2009 (video replay) November 20 Syracuse November 18 Binghamton December 4 Albany November 19 Ithaca; Long Island; Saratoga December 11 New York City November 20 Canton; Utica; Watertown December 2 Buffalo; Suffern December 3 Plattsburgh December 4 Jamestown; Poughkeepsie December 10 Corning; Westchester December 11 Loch Sheldrake

† Does not qualify as a basic level course and, therefore, cannot be used by newly admitted attorneys for New York MCLE credit. NYSBA’s CLE Online ONLINE | iPod | MP3 PLAYER

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Advanced Real Estate Practice December 14 New York City

†Estate Planning (video replay) January 22 Jamestown

Come click for CLE credit at: www.nysbaCLEonline.com To register or for more information call toll free Features 1-800-582-2452 Electronic Notetaking allows you to take notes while listening to your course, cut-and-paste from the texts and access In Albany and surrounding areas dial notes later – (on any computer with Internet access). (518) 463-3724 • Or fax your request Audio Seminars complement the onscreen course texts. to (518) 487-5618 You control the pace, and you can “bookmark” the audio www.nysba.org/CLE at any point. (Note: As a NYSBA member, you’ll Bookmarking lets you stop your course at any point, then receive a substantial discount) pick up right where you left off – days, even weeks later. MCLE Credit can be obtained easily once you’ve completed the course – the form is part of the program! Just fill it out and mail it in for your MCLE certificate.

WILLIAM COMISKEY (William_ [email protected]) is Deputy Commissioner for Enforcement, New York State Department of Taxation and Finance. In this role, he supervises the full spectrum of the Department’s enforcement activi- ties, including audits, collections, investigations and civil and criminal enforcement efforts. Before this, New Criminal the author served for many years in senior law enforcement positions involving the prosecution of fraud and corruption cases. He is a gradu- ate of Fordham University School Tax Laws of Law. Taking Aim at Tax Evaders By William Comiskey

n an effort to narrow New York’s annual multi-billion Former Statutes dollar tax gap – the difference between the taxes Because the new law applies only to crimes commit- Iowed and the taxes collected – and to combat tax ted after April 7, 2009, the former law will continue to fraud, on April 7, 2009, Governor David Paterson signed govern many of the cases brought over the next three into law historic legislation to increase civil and criminal to five years. Most of New York’s former criminal tax penalties for fraud and tax evasion and to improve the provisions, which are contained in Article 37 of New Tax Department’s ability to identify and pursue non- York’s Tax Law, §§ 1800–1848, were enacted as part of the compliant taxpayers. These changes signal an unmistak- Omnibus Enforcement Act of 1985. This act created sepa- able determination to improve tax compliance and curtail rate criminal provisions for 13 different types of taxes cheating. They will be welcome news for the millions of administered by the state. honest taxpayers who are forced to take up the slack for In application, the former laws were both unfair and those who cheat. inadequate. This article examines the changes to the criminal They were inadequate because the penalties imposed tax code. The new law replaces a confusing and unfair were not commensurate with the societal harm caused by patchwork of tax crimes that often left serious tax fraud the misconduct. Because the vast majority of tax offenses untouched and that sometimes treated minor acts of under the former law were only punishable as misde- cheating more severely than major tax evasion. The new meanors or low-level felonies, the laws failed to serve as law creates a new crime – tax fraud – and adopts a classi- a meaningful deterrent to tax fraud.3 Worse, the former fication system for felony offenses that markedly increas- laws often failed to adequately distinguish between series the severity and punishment for acts of serious tax eva- ous tax fraud and minor acts of cheating. Indeed, the for- sion. It also increases the monetary penalties for felony mer law punished more severely certain types of evasion tax fraud, expands county jurisdictional provisions for while treating other types of evasion, which caused the false filing tax offenses, and amends County Law § 702(7) same or greater harm to the state, more leniently. to make it easier for district attorneys to cross-designate The crimes under former Tax Law § 1802, which dealt Tax Department attorneys to prosecute tax cases.1 with the failure to file income tax returns, are a good illus- Given the Department’s increased commitment to tration. Because the deliberate failure to file an income tax fighting tax fraud,2 these new laws will provide prosecu- return under the former law only became a felony when tors with additional tools and resources to punish and the taxpayer willfully and with intent to evade payment deter those who engage in serious evasion of their tax of the tax failed to file for three consecutive years (if obligations. there was a tax due in each of those years), an income tax

NYSBA Journal | November/December 2009 | 11 evader who defrauded the state of millions by not filing degree, the lowest level of tax fraud, is a class A misde- in a single year or in two consecutive years faced, at most, meanor as provided in the new Tax Law § 1802. a misdemeanor under former Tax Law § 1801. Most significantly, the law creates a new series of tax In contrast, a low-level cheat who intentionally filed felonies to punish major tax evaders. If the defendant a false income tax return misrepresenting earnings or commits a tax fraud act and evades more than $3,000 deductions, even by a small amount, faced (and still in tax liability, the defendant now faces potential felony faces) prosecution for a class E felony false filing prosecu- liability under new §§ 1803–1806, which define the levels tion under the Penal Law. Thus, our former law treated of tax felonies based on monetary thresholds. Under the the taxpayer who exaggerated charitable contributions by new law, evasion of more than a million dollars in taxes a few hundred dollars as a felon, while the million-dollar is now a class B felony. non-filing income tax cheater faced only a misdemeanor. Prior law also failed to distinguish between major Tax Fraud Acts – The Defendant Must Act Willfully league cheats and relatively minor acts of fraud in other Section 1801 of the new law defines the eight ways in ways as well. For example, the prior law treated all three- which a criminal tax fraud act can be committed. These year repeat income tax non-filers the same, whether they newly defined tax fraud acts are, in the main, already defrauded the state of $100 in each of the years they failed penalized as misdemeanors by statutes within the tax law to file or cheated the state of $1 million in each of those that apply to one or more – but not all – of the taxes the years. In each instance, the tax evader faced the lowest state administers. Now, however, the willful commission class felony in New York – a class E felony – and the same of these tax fraud acts is a misdemeanor regardless of the low level of penalty.4 type of tax involved. In another example, the former law treated false fil- New Tax Law § 1801(c) defines “willfully” ers who fraudulently obtained refunds more harshly to mean acting with either intent to defraud, intent to than those who fraudulently underpaid their taxes, even evade the payment of taxes or intent to avoid a require- though the financial harm to the state in both instances ment of this chapter [the Tax Law], a lawful require- was identical. Taxpayers who obtain refunds through ment of the commissioner or a known legal duty. false filings face larceny charges under the Penal Law The new definition standardizes the minimum which, as described in endnote 3, provides escalating required culpable mental state for all tax offenses. Under penalties depending upon the amount of money stolen, the former law, misdemeanor tax violations for identical with a top charge of a B felony for stealing a refund of or similar conduct were defined in numerous sections more than $1 million. In contrast, taxpayers who did not scattered throughout Article 37,6 which defined the obtain a refund but instead filed false returns and under- required culpable mental state in several ways. Most sec- paid their taxes faced only an E felony, whether taxes of tions required that the person act willfully, but the statute $1 or $10 million were evaded. did not define how one acts willfully. One former section, These irrational and unfair distinctions are eliminated 1815(a)(1)(D), penalized the failure to file a highway by the recently enacted revisions to Article 37. The new use and fuel tax report, without specifying any culpable criminal provisions streamline Article 37 and eliminate mental state. The misdemeanor provisions for income, redundant and confusing provisions to create a simpler, corporate and estate taxes used yet another formulation fairer and more just criminal tax law. that required the defendant to act with either an “intent to evade any tax imposed under article twenty-two” or an Revised Article 37 “intent to evade . . . any requirement” of the applicable The law now treats all tax fraud the same, regardless of tax article.7 type of tax evaded and regardless of how the fraud was The new definition of “willful” includes all the prior accomplished. The new structure recognizes that every formulations of culpable mental states under the former form of tax evasion – whether occasioned by non-filing, provisions of Article 37 and further includes a formula- false filing or by some other fraudulent scheme – causes tion of acting willfully that has been recognized by the the same harm to the state and thus warrants the same Court of Appeals.8 This is also a formulation of the term punishment. It also recognizes that the severity of these “willful” that is the standard under federal law.9 Proof crimes against the public pocketbook should be mea- establishing any of the formulations will establish that sured by the amount of harm suffered by the state and the defendant acted willfully. local governments. These fundamental concepts are at the core of the new provisions. Eight Ways to Commit Tax Fraud The new law creates a new crime, tax fraud, and New Tax Law § 1801(a) sets out the eight ways in which defines eight ways in which tax fraud can be commit- a tax fraud act can be committed by a person willfully ted when the defendant has acted willfully.5 Each of the tax fraud acts are examined below. Tax fraud in the fifth CONTINUED ON PAGE 14

12 | November/December 2009 | NYSBA Journal

CONTINUED FROM PAGE 12 tax filer or an excise tax filer – who intends to evade tax engaging in, or willfully causing another person to engage and succeeds in evading more than $3,000 in tax liability in, those acts. The Penal Law rules relating to accomplice will face felony penalties. Because the Internal Revenue and corporate liability and anticipatory offenses all apply Service has reported that approximately 11% of the fed- to crimes committed under the Tax Law.10 eral tax gap is attributable to taxpayers who evade their tax responsibilities by not filing, the legislative determi- Tax Fraud Act 1 – Willful Failure to File a Return nation to increase the penalties for income tax non-filers or Other Required Document. who commit serious tax evasion is appropriate. New Tax Law § 1801(a)(1) replaces in a single provision numerous sections that made the failure to file certain Tax Fraud Acts 2 and 3 – Willfully and Knowingly returns and documents due under the Tax Law a misde- Making or Filing a False Return or Report or meanor. The new law does not significantly change or Supplying False Information. expand the misdemeanor penalties for failure to file, but New Tax Law § 1801(a) subsections (2) and (3) relate to it does make major changes to the felony penalties for false returns and submissions. They replace numerous these acts. Tax Law sections that prohibited the filing or making of a The new law defines a tax fraud act to include willful false return or report and the submission of false informa- “fail[ure] to make, render, sign, certify or file any return tion to the state or to the Tax Department. The new provi- or report”11 required under the tax laws and regulations sions are stronger and broader and make it unmistakably within the time required by or under the tax laws and clear that those who willfully and knowingly deceive the regulations. government in a tax matter commit a crime. The former statutory prohibitions were a mess. The The new provisions make it provisions lacked consistent language and were scattered unmistakably clear that those who throughout Article 37. The former false submission provisions applied to different documents and submissions,12 willfully and knowingly deceive had different elements,13 required different culpable the government in a tax matter mental states14 and imposed different penalties. Identical commit a crime. acts of deception constituted a misdemeanor if done with respect to one type of tax return or document and felonies The willful failure to file becomes a felony under the for others.15 There was no discernible rhyme or reason to new law when the taxpayer acts with the intent to evade these provisions. a tax and evades more than $3,000 as a result of his or her In two sections that are intended to address the uni- act. These new felony sections substantially expand the verse of acts involving the submission of fraudulent law as it relates to felony failure to file certain returns and information to the Department, the new statute brings diminishes liability in a few situations. consistency and uniformity to the Tax Law while broad- The former Tax Law imposed felony liability on tax- ening the reach of the criminal sanctions to cover the full payers for failing to file only in limited circumstances. spectrum of acts of deception. First, § 1815(b) made the “willful” failure to file a highway New Tax Law § 1801(a)(2) sets out the rules relating use or fuel tax return with the “intent to evade the tax” to false documents that are filed with the state. It is a tax a class E felony, regardless of the amount of tax evaded. fraud act when a person willfully, while Under the new law, such a failure will result in a felony knowing that a return, report, statement or other docu- only if the amount of taxes evaded exceeds $3,000. ment under this chapter contains any materially false Second, failure to file income or corporate tax was, or fraudulent information, or omits any material infor- under the former law, a felony when the taxpayer failed mation, files or submits that return, report, statement to file for three consecutive years and the taxpayer had a or document with the state or any political subdivision tax liability in each year. The new felony provisions elimi- of the state, or with any public office or public officer nate the requirement that the taxpayer fail to file repeat- of the state or any political subdivision of the state. edly and instead impose felony liability if the defendant New Tax Law § 1801(a)(3) deals with other informa- possesses the intent to evade tax or to defraud the state tion that is submitted to the Department. It is a tax fraud or a subdivision and as a result in fact underpays an act if a person willfully and amount that meets the monetary thresholds specified in knowingly supplies or submits materially false or the felony tax fraud sections. fraudulent information in connection with any return, Many non-filers of all tax types who did not face audit, investigation, or proceeding or fails to supply felony sanctions under the former law will be subject to information within the time required by or under the felony prosecution under the new statute. Any willful provisions of this chapter or any regulation promul- non-filer – whether a delinquent sales tax filer, an income gated under this chapter.

14 | November/December 2009 | NYSBA Journal These new laws thus cover every materially false where false submission resulted in a tax evasion of more tax filing and submission regardless of the type of taxes than $3,000. involved. Of course, these new Tax Law provisions are in addi- The provisions relating to materially false submis- tion to the Penal Law false filing statutes, which penalize sions in § 1801(a)(3) are especially significant in that as a misdemeanor knowingly filing a false document with they apply to every type of submission, including oral any public office or public servant19 and which elevate submissions, made to the Department in connection with that conduct to a class E felony when the false filing is any return, audit, investigation or proceeding. They also performed with an intent to defraud the state or any apply to taxpayers who willfully fail to timely supply the political subdivision.20 There is no monetary requirement Department with information required by the Tax Law to establish a felony Penal Law false filing crime. Thus, and its regulations. defendants who file a false income tax return that cheats The knowing submission of fraudulent documenta- the government of less than $3,000 will face both a Tax Law tion to justify a position taken on a tax return would misdemeanor under the new law and a Penal Law felony. unquestionably fall within this provision as would a materially false representation made by a taxpayer, or Tax Fraud Act 4 – Willfully Engaging in a Scheme to his or her representative, to an auditor or investigator Defraud the State in Connection With Any Matter during the course of a Department audit or investigation Under the Tax Law. relating to the existence or non-existence of taxpayer Criminal sanctions are now provided for fraudulent con- records or other facts. A taxpayer who falsely asserts that duct that does not neatly fit into the parameters of a false he or she does not maintain sales tax records, or who document or non-filing tax evasion case. fails to supply those records to the Department when New Tax Law § 1801(a)(4) makes it a tax fraud act required during a sales tax audit, or who claims that he when a person willfully or she has only one business bank account when the tax- engages in any scheme to defraud the state or a politi- payer has several, runs the risk of committing this type cal subdivision of the state or a government instru- of tax fraud act. mentality within the state by false or fraudulent pre- The rules also apply to tax professionals who know- tenses, representations or promises as to any material ingly provide false documents or who make false asser- matter, in connection with any tax imposed under this tions on behalf of taxpayers during a Department audit. chapter or any matter under this chapter. As noted above, new Tax Law § 1832(b) specifically The language of this provision is similar to language provides that the Penal Law provisions relating to acces- included in the Penal Law statutes defining “Scheme to sorial liability apply to tax crimes. The Department has Defraud”21 and “Defrauding the Government”22 but, identified fraudulent conduct by tax professionals as unlike those statutes, it does not require that the tax a major area of concern and has, for more than a year, scheme involve a “systemic ongoing course of conduct,” cracked down on such fraud in cases across the state.16 nor does it require that the defendant obtain property This provision makes clear that tax professionals who from the state as a result of the false or fraudulent pre- intentionally help taxpayers cheat in their filed returns or tenses, representation or promises. The statute is also during an audit will be held accountable as an accomplice different in that, unlike the Penal Law offenses, this new to the taxpayer and will face the same penalties as the section requires that the false or fraudulent pretenses, corrupt taxpayer. representations or promises be material. The new laws reduce three false filing felonies under This new section would reach frauds such as cigarette the former Tax Law to misdemeanors when the tax tax evasion schemes in which bootleggers sell untaxed evaded is less than $3,000.17 Under the former law, these cigarettes with counterfeit tax stamps in an effort to felonies did not require any level of tax evasion. evade the cigarette taxes. Many of these criminals do not The new law also replaces provisions that made know- file returns and are not required to file returns, nor are ingly filing a false income or corporate tax return with they directly required to pay the taxes they are evading. intent to evade a tax a class E felony when the false filing Nonetheless, their acts create the false pretense that the produced a “substantial understatement” of tax, which tax has been paid and they are acting with the intent to was defined as at least $1,500.18 Under the monetary defraud the state and evade the cigarette tax. This broad thresholds adopted by the Legislature, knowingly filing statute thus provides prosecutors with the tools to reach a false income or corporate tax return will be a tax felony these and other schemes that do not neatly fit the typi- only when the amount of evaded tax exceeds $3,000. cal tax evasion case. Because the amount of tax evaded Finally, the new law creates new felonies for all other by those engaged in cigarette bootleg schemes is often false document and false submission cases in which the quite significant, the new levels of tax felonies, described materially false submission has been willfully made or below, will be especially important in making cases filed with the intent to evade a tax or to defraud and against bootleggers.

NYSBA Journal | November/December 2009 | 15 Tax Fraud Act 5 – Willfully Failing to Remit Taxes Under new § 1801(a)(6), the willful failure to collect Collected on Behalf of the State. taxes when required is defined as a tax fraud act. If the New Tax Law § 1801(a)(5) makes it a tax fraud act when taxes not collected exceed $3,000 in one year, the act is a person willfully a felony. These changes eliminate some unsupportable fails to remit any tax collected in the name of the state results under the prior law. Previously, a sales tax vendor or on behalf of the state or any political subdivision of who failed 200 times to collect $75 in sales tax, resulting the state when such collection is required under this in a $15,000 evasion, or one who failed to collect $9,000 chapter. in sales tax in a single transaction, faced a lesser penalty Employers who collect withholding taxes from their (a misdemeanor) than a vendor who committed a felony employees and vendors who collect sales taxes from their by failing on 10 occasions to collect $100, resulting in a customers are fiduciaries who hold these collected taxes $1,000 evasion. These unjust results are corrected under in trust on behalf of the government. Fiduciaries who the new law and the vendors who commit the $15,000 steal these trust funds may be prosecuted for larceny and $9,000 evasions will face prosecutions for a class D under the Penal Law and under the former and new Tax or E felony; the vendor who evades $1,000 will face only a misdemeanor.

Tax Fraud Act 7 – Willfully and With an Intent to Failing to collect sales tax is a Evade Any Tax, Failing to Pay a Tax Due. common form of tax evasion. New Tax Law § 1801(a)(7) defines a tax fraud act to include one where a party willfully and “with intent to evade [payment of a] tax fails to pay [such] tax.” The requirement under the new law that the failure to Laws.23 Under the former Tax Law, there was no Tax Law pay must be both willful and with intent to evade tax crime that penalized the failure of a sales tax vendor to requires a greater showing of intent than a series of sec- remit collected taxes and the Tax Law penalty for employ- tions under the former law, which required only that the ers who failed to remit withholding taxes was only a non-payment be “willful.”26 It also requires a greater misdemeanor, regardless of the amount of payroll taxes showing of intent than former Tax Law § 1810 (income, withheld and not remitted.24 earnings and corporate taxes), which authorized a failure This new provision makes it a tax fraud act, punish- to pay misdemeanor prosecution when the defendant able under the Tax Law, to willfully collect and fail to acted with the intent to evade “any lawful requirement remit these taxes. of the commissioner” or to evade tax. The new law may be satisfied only by proof that the taxpayer not only failed Tax Fraud Act 6 – Willfully Failing to Collect a Sales, to pay but did so willfully and with the specific intent to Excise or Withholding Tax That Is Required to Be evade payment. Collected. By requiring that non-payment may be punished only Failing to collect sales tax is a common form of tax eva- when willful and when the non-payment is occasioned sion whereby business operators seek a competitive by an intent to evade the tax, the new law attempts to advantage by offering to sell property to customers with- take those who would pay but who cannot out of the out collecting or charging sales tax. Often, to hide the eva- criminal realm. sion, the transactions are conducted in cash and without The former Tax Law imposed no felony liability for receipts, which also facilitates income tax evasion by the failing to pay a tax. The new law provides for felony business operators. liability if as a result of failure to pay with a specific intent The prior law failed to adequately address this type of to evade tax, the person in fact underpays an amount that evasion. Former Tax Law §§ 1806(a) (withholding taxes) meets the monetary thresholds specified in the felony tax and 1817(c) (sales taxes) made it a misdemeanor for fraud sections. This new section will provide prosecutors employers or sales tax vendors to willfully fail to collect with a possible tool to address the thousands of taxpay- taxes. For others who are required to collect taxes, the for- ers who file, often repeatedly, income or sales tax returns mer catchall provisions making willful acts or omissions without paying their liabilities. of any provisions of particular articles a misdemeanor also provided a mechanism to reach the same result.25 Tax Fraud Act 8 – Issuing False Exemption The only felony for failing to collect any of these taxes Certificates. was former § 1817(c)(2), which made it a class E felony to New Tax Law § 1801(a)(8) defines a tax fraud act to fail to collect $10,000 in sales tax or to fail to collect $100 include one where a party willfully or more on 10 or more occasions. issues an exemption certificate, interdistributor sales certificate, resale certificate, or any other document

16 | November/December 2009 | NYSBA Journal capable of evidencing a claim that taxes do not apply The following chart compares the monetary thresh- to a transaction, which he or she does not believe to be olds for these various crimes: true and correct as to any material matter, which omits Tax/ Larceny/Welfare/ any material information, or which is false, fraudulent, Classification Degree Health Care Fraud Insurance or counterfeit. E felony 4th >$3,000 >$1,000 The requirement under the new law that the failure D felony 3rd >$10,000 >$3,000 to file be “willful” before misdemeanor liability attaches C felony 2nd >$50,000 >$50,000 is identical to the mental state under former Tax Law B felony 1st >$1,000,000 >$1,000,000 §§ 1812-f(c)(4) (petroleum taxes), 1812(c)(4) (motor fuel taxes) and 1817(m) (sales taxes). The new definition adds The new structure represents a significant step in to those statutes by making clear that a willful omission increasing the sanctions for serious tax evasion in the in an exemption certificate or an entirely false certificate income, corporate and excise tax areas. For high-end constitutes a violation of the law. income and corporate tax evaders, the new law means The former law imposed no felony liability. The new that for the first time they will face class D, C and B felony law provides for felony liability if the defendant pos- charges. While sales tax and withholding tax evaders sesses the intent to evade tax or to defraud the state or a have long faced these levels of felonies when prosecuted subdivision and as a result in fact underpays an amount under the larceny statutes, the addition of the new tax that meets the monetary thresholds specified in the fraud statutes will provide prosecutors with a second tool felony tax fraud sections. with which to pursue such evaders.28 The Legislature’s determination to set higher mon- Felony Tax Fraud Classifications etary thresholds for the class D and E levels of tax fraud To elevate a tax fraud act to a felony, two facts must be will have a practical impact in Tax Law prosecutions for established. First, the defendant must act with the intent certain types of tax fraud. It will not have any practical to evade a tax due or to defraud the state or a political impact in cases involving tax evaders who collect but fail subdivision. With the addition of this mens rea, tax law to remit sales or withholding taxes because these cheaters felonies can be committed only when the defendant acts will continue to face liability under the Penal Law larceny both willfully (as required to commit a tax fraud act) provisions. Similarly, tax evaders who file a false return and with the intent to evade or defraud. The additional but who do not reach the monetary threshold to establish mental element is designed to ensure that felony liability a felony tax fraud will nonetheless continue to be liable for under the Tax Law applies only to those who deliberately the Penal Law class E felony “Offering a False Instrument evade their responsibilities and not to those who may for Filing.” Under the new Tax Law, these Penal Law have failed to comply with a tax obligation (and who may charges remain available to prosecutors to the same extent owe substantial taxes as a result) but who have not acted as they were available under the former law.29 with criminal intent to evade paying those taxes. Second, a tax fraud act is a felony only when the tax Aggregation evaded reaches the monetary thresholds set out in new The new law limits the amount of unpaid tax liability that Tax Law §§ 1803 (tax fraud in the fourth degree) to 1806 can be considered in determining the grade of the felony (tax fraud in the first degree). Under the new law, the crime. The Legislature rejected the Governor’s proposal, felony grades of tax fraud are defined in monetary terms based on the long-standing rules applicable to larceny where the degree of the crime and the severity of punish- cases, to permit prosecutors to aggregate amounts of ment turn on the amount of loss to the state. unpaid tax liabilities over multiple years to establish the In fixing the tax fraud thresholds, the Legislature monetary thresholds for felony tax fraud charges.30 rejected the Governor’s proposal to use the familiar mon- Instead, the Legislature adopted a rule that permits etary thresholds that currently exist in the Penal Law for aggregation but only for liabilities evaded within a single- the crimes of grand larceny, welfare fraud and insurance year period. Each felony provision in the new law specifi- fraud.27 The Governor’s proposal was based on the view cally provides that the amount of evaded tax liability must that tax evasion is essentially stealing from the state and be determined by looking at the tax not paid “in a period that it should be treated with the same seriousness that of not more than one year.” In addition, new § 1807 sets our law treats any type of larceny. Instead, the Legislature out the tax fraud aggregation rule. It provides that opted for the thresholds that were recently adopted for the payments due and not paid under article one of health care fraud in Penal Law Article 177, which estab- this chapter pursuant to a common scheme or plan lished higher monetary levels for the class E and class or due and not paid, within one year, may be charged D levels of tax fraud. Even so, the new law nonetheless in a single count, and the amount of underpaid tax results in a structure that substantially increases the pen- liability incurred, within one year, may be aggregated 31 alties for serious tax evasion. in a single count.

NYSBA Journal | November/December 2009 | 17 These changes will signiﬁ cantly vided. Similarly, the new venue statute for tax offenses increase the monetary penalties authorizes tax prosecutions based on false filings in any faced by high-end tax cheats. county where the underlying transaction occurred or purportedly occurred.

Subpoenas This new aggregation rule relates only to aggregation The new statute replaces various sections of Tax Law under the Tax Law and does not limit the prosecutor’s Article 37 that made it a misdemeanor offense for indi- well-established ability to aggregate sales tax or with- viduals to willfully fail to comply with some, but not holding tax liabilities to determine the appropriate level all, Department administrative subpoenas.33 New Tax of larceny to be charged. Since these cases involve stolen Law § 1831 makes the willful failure to comply with any trust funds, a more expansive rule of aggregation is justi- Department subpoena a misdemeanor. These changes are fied. significant, especially in light of the Department’s decid- edly more aggressive use of its investigative subpoena Other Provisions: Monetary Penalties power, as illustrated by the following numbers: The new law amends Tax Law § 1800(c) to increase the Subpoenas Issued in Fiscal Year monetary penalties for tax felonies to “the greater of Criminal Fraud Investigations double the amount of the underpaid tax liability resulting 2006–2007 199 from the commission of the crime” or either $50,000 for 2007–2008 349 individuals or $250,000 for corporations. These changes will significantly increase the monetary penalties faced by 2008–2009 1,320 high-end tax cheats and are consistent with the new civil Tax Preparers penalties that were also enacted as part of the enforce- The Legislature also took steps this year to begin regu- ment package in this year’s budget bill.32 The maximum lating the tens of thousands of unlicensed tax preparers fines for tax misdemeanors remain unchanged – $10,000 doing business in the state. These preparers operate for individuals or $20,000 for corporations. without any educational standards and with limited oversight and, as the Department’s investigations have Venue demonstrated, too many engage in brazen and open The new law expands the county venue provisions for fraud.34 false filing tax offenses by creating a new subsection New Tax Law § 32 requires tax preparers who are (m) to N.Y. Criminal Procedure Law § 20.40(4). The new not licensed attorneys or certified public accountants provision recognizes that taxpayers are often involved to register with the Department as tax preparers and to in economic activity in one county that gives rise to a sign every return that they prepare. Under new Tax Law tax liability reflected in a tax return that happens to be § 1833 the failure to register or sign a return is a mis- filed in a different county. The new provision enables demeanor. Section 32 further directs the Department to the prosecutor in the county where the economic activity convene a task force to examine the issues relating to tax took place to prosecute the resultant tax crimes. That new preparers and to make recommendations for standards section provides the following: and educational requirements. That task force began (m) An offense under the tax law or the penal law of meeting in the fall of 2009. filing a false or fraudulent return, report, document, declaration, statement, or filing, or of tax evasion, Conclusion fraud, or larceny resulting from the filing of a false It is a new day for criminal tax enforcement in New York or fraudulent return, report, document, declaration, and the fight against tax fraud is a central component of or filing in connection with the payment of taxes to the Department’s strategy to narrow New York’s annual the state or a political subdivision of the state, may multi-billion dollar tax gap. To carry out this strategy, in be prosecuted in any county in which an underlying the past two years the Department has built a credible transaction reflected, reported or required to be reflect- and effective criminal tax enforcement presence. The goal ed or reported, in whole or part, on such return, report, of this enforcement effort is not, however, simply to make document, declaration, statement, or filing occurred. more tax cases or more serious cases. To the contrary, the Conceptually, the new section is similar to CPL objective is to create an environment where the threat § 20.40(4)(k), which defines jurisdiction regarding false of serious prosecution serves as an effective deterrent to filing and larceny charges based on filed false instru- influence taxpayers to voluntarily comply with the law. ments seeking payment or reimbursement for services We know that deterrence works35 and we are confident or goods. That statute allows prosecution in the county that the adoption of the Governor’s historic enforcement where the goods or services were purported to be pro- package will help the Department and state prosecutors

18 | November/December 2009 | NYSBA Journal defraud a class E felony. This crime is virtually always charged in cases involv- deter many who previously thought they were above the ing fraudulent tax returns that have been filed; ■ tax law. Falsifying Business Records in the First Degree, in violation of Penal Law § 175.10, which makes the fraudulent creation of false business records to con- 1. With regard to the County Law amendment, the Department has recently ceal or commit another crime a class E felony. hired experienced former white-collar prosecutors and investigative attorneys to lead fraud investigative teams across the state. This new law will make these Grand Larceny in violation of Article 155 is often charged in tax cases involv- prosecutors available to county prosecutors struggling with limited resources. ing the theft of more than $1,000 in collected sales taxes or collected employee withholding taxes. The level of felony turns on the amount stolen, with the top 2. In the last two years, the Department has restructured and quintupled its larceny offense (for the theft of more than $1 million) being a class B felony. criminal fraud investigative staff and is now investigating and seeking crimi- Penal Law § 155.42. nal prosecution for more tax fraud cases than ever. In fiscal year 2008–2009, the Department opened 2,078 criminal fraud investigations, the most in its history, 4. See former Tax Law § 1802. and up from 928 cases in ’07–’08 and 581 in ’06–’07. At the same time it referred 5. See new Tax Law § 1801(a). more cases to prosecutors. Criminal fraud referrals in ’08–’09 grew to 594, up 6. See, e.g., former Tax Law §§ 1801(a), (b) (income and corporate taxes); from 271 in ’07–’08 and 198 in ’06–’07. For more on the Department’s increased 1811(a) (estate and gift taxes); 1812(b) (motor fuel taxes); 1812-f (b) (petroleum focus on criminal tax enforcement, see, e.g., Jason Subik, State Getting Tough on taxes); 1813(b) (alcoholic beverage tax); 1814(b) (cigarette and tobacco products Sales Tax Cheaters, Daily Gazette, Aug. 12, 2009; Gerald B. Silverman, New York tax); 1815(a)(1)(D) (highway use and fuel use tax); 1817(a) (sales tax); 1817(l) State Steps Up Enforcement, Cracks Down on Preparers to Close Tax Gap, BNA Daily (compensating use tax). Tax Report, Dec. 11, 2008; Tom Herman, New York Sting Naps Tax Preparers, Wall St. J., Nov. 26, 2008; Jack Trachtenberg & Michelle Merola-Kane, New York’s Less 7. See former Tax Law §§ 1801(a), (b), 1811(a). Kind and Gentle Tax Department – Preparing for Criminal Investigations, State Tax 8. See People v. Coe, 71 N.Y.2d 852, 527 N.Y.S.2d 741 (1988) (to establish a will- Notes, Mar. 31, 2008 at 1041. ful violation of the Public Health Law, which is a misdemeanor under Public 3. The inadequacy of the former criminal tax law was mitigated, at least Health Law § 12-b, the People are required to establish that the defendant is in part, by the fact that certain Penal Law provisions were also applicable to aware that his or her conduct is illegal). some types of tax cases. See, e.g., former Tax Law §§ 1806(b), 1817(k) (the Tax 9. United States v. Bishop, 412 U.S. 346 (1973). Law criminal provisions relating to withholding and sales tax did not preclude prosecution under the Penal Law with respect to the willful failure to pay over- 10. New Tax Law § 1832(b). collected sales or withholding taxes). The Penal Law statutes will remain avail- 11. Tax Law § 1801(a)(1). able to prosecutors under the new law. See new Tax Law § 1832. 12. For example, the criminal provisions relating to income tax and corpo- The most common Penal Law statutes that had, and that will continue to have, rate tax made it a misdemeanor to “make, render, sign, certify or file” a false relevance to some types of tax prosecutions include: “return, declaration or document” and a felony to file a false return (former Offering a False Instrument for Filing in violation of Penal Law § 175.35, which Tax §§ 1804(a), (b), 1805(a), (b)). The provisions relating to cigarette and tobacco makes knowingly filing a false instrument with the state with the intent to taxes prohibited as a misdemeanor the “making and subscribing” of any

NYSBA Journal | November/December 2009 | 19 “return, report, statement or other document which is required to be filed” and 23. See former Tax Law §§ 1806(b) (withholding taxes); 1817(b)(k) (sales “willfully delivering or disclosing . . . any list, return, report, account, state- taxes); new Tax Law § 1832. ment or other document” known to be false or fraudulent as to any material 24. Former Tax Law § 1806(c). matter (former Tax Law § 1814(c)(1), (2)). 25. See, e.g., former Tax Law §§ 1813(f) (alcoholic beverage tax), 1814(h) (ciga- 13. Some provisions required that the filing be false in a material respect while rette and tobacco products tax). others did not have any requirement of materiality and some covered material omissions and others did not. See and compare former Tax Law §§ 1812(c) 26. See former Tax Law §§ 1811(a) (estate, gift, and transfer taxes); 1812(b) (motor fuel); 1812-f(c) (petroleum tax); 1813(c) (alcoholic beverage tax); 1814(c) (motor fuel taxes); 1812-f(b) (petroleum taxes); 1813(b) (alcoholic beverage tax); (cigarette and tobacco products tax); 1817(b) (sales and use tax) with former Tax 1814(b) (cigarette and tobacco products tax); 1817(l) (sales or compensating use Law §§ 1804(b), (c); 1805(b), (c) (income and corporate tax returns). tax). 14. Compare, for example, the former provisions relating to filing a false 27. See Penal Law arts. 155 (larceny); 158 (welfare fraud); 176 (insurance income tax return, which required an “intent to evade” the income tax (former fraud). Tax Law § 1804(b)) with the motor fuel provisions which prohibited willfully 28. Because there are different thresholds between the tax fraud statutes and making and subscribing a return or document that was required to be filed the Penal Law larceny statutes, a sales tax cheater stealing more than $1,000 in when the person “does not believe [the document] to be true and correct as to collected sales tax dollars will face a felony larceny charge (Grand Larceny in every material matter” (former Tax Law § 1812(c)(1)). the 4th degree) but only a misdemeanor tax fraud charge (Tax Fraud in the 5th 15. Making or filing a false document or return was a misdemeanor under degree). the former law, regardless of the amount of tax evaded, for estate tax filings 29. New Tax Law § 1832. (former Tax Law § 1811(b)), petroleum tax filings (former Tax Law § 1812-f(c)), and cigarette and tobacco tax filings (former Tax Law § 1814(c)). In contrast, 30. The rules for establishing the amount stolen in a larceny case allow pros- for the following types of taxes, making and subscribing a false return or docu- ecutors to aggregate multiple takings when those takings are accomplished ment that was required to be filed was a felony under the former tax law, again pursuant to a single, sustained criminal impulse or a general fraudulent regardless of the amount of tax evaded: motor fuel tax filings (former Tax Law scheme. See generally People v. Cox, 286 N.Y. 137, 36 N.E.2d 84 (1941). § 1812(c)) and alcohol tax filings (former Tax Law § 1813(c)) and highway or 31. As adopted, this statute permits aggregation of payments not paid “under fuel use tax returns (former Tax § 1815(b)). Filing a false income or corporate article one of this chapter.” There are, however, no payments that are required tax return under the former law was a felony if the false filing “substantially” or made under “article one” of the Tax Law which consists of a hodgepodge of understated the defendant’s tax liability, which was defined as understating definitional and similar provisions. Undoubtedly, the Legislature intended to liability by at least $1,500 (former Tax Law §§ 1804(b), (c), 1805(b), (c)). limit aggregation to payments made under “one article” of the Tax Law (and 16. Descriptions of numerous recent prosecutions of tax preparers can be found not to taxes paid under “article one”) and it is hoped that this unintentional among the press releases on the Department’s Web site: www.nystax.org. drafting error will soon be corrected. 17. Former Tax Law §§ 1812(c)(1) (relating to making false motor fuel tax In addition, the changes to the aggregation statute diluted an important and returns); 1813(c)(1) (relating to alcohol beverage tax documents); 1815(a)(1)(E) often used prosecutorial tool for dealing with multi-year tax evaders. This (relating to highway use and fuel tax). dilution is inconsistent with the overall intent of the new law to strengthen the criminal tax statutes, and it will hopefully be corrected by restoration of the 18. Former Tax Law §§ 1804(b), (c), 1805(b), (c). former non-filing felonies. Former Tax Law §§ 1802 and 1803, which made it a 19. Penal Law § 175.30. felony to fail to file income or corporate tax returns for three or more consecutive years (where there was a liability in each of those years), were among the 20. Penal Law § 175.35. many sections of the former law that were repealed as unnecessary or repetitive 21. Penal Law §§ 190.60, 190.65. under the new law. These former sections were mainstays of previous enforce- 22. Penal Law § 195.20. ment efforts, forming the basis on which most income tax non-filing cases were referred to prosecutors and accepted by them for investigation and potential prosecution. Under the provisions originally proposed by the Governor, which allowed aggregation over multiple filing years and which set the felony level at $1,000, it was believed that the former sections were unnecessary and redundant. In light of the Legislative changes to both the felony thresholds and the aggregation provisions, however, non-filer cases that were previously (and often) filed as felonies will now only be misdemeanors. Unless the Legislature reinstates former §§ 1802 and 1803, prosecutors will have lost the effective tools that existed under the prior law to deal with repeated failures to file personal and corporate income tax returns, even as the state is plagued by such failures to file, which number in the hundreds of thousands each year. 32. See the amendments to Tax Law §§ 289-b(1)(d), 433(1)(d), 512(1)(d), 527(d), 685(cc), 1085(f)(2), 1145(a)(2). 33. Former Tax Law §§ 1809 (subpoenas in income and corporate tax matters); 1812(g) (subpoenas in connection with motor fuel taxes); 1812-f(e) (subpoenas in connection with petroleum business taxes); and 1817(n) (subpoenas in connection with sales taxes). 34. See, e.g., the cases described in the articles noted in note 2, supra, and in numerous press releases about preparer cases that appear on the Department’s Web site: www.nystax.gov. 35. One of the Department’s economists has estimated that the Department’s well-publicized crackdown on fraudulent preparers produced an increase in voluntarily paid taxes of over $200 million during the 2008 income tax filing season. Roger Cohen, It Pays to Increase Enforcement on Income Tax Preparers, State Tax Notes, vol. 50, p. 709, Dec. 15, 2008. Other Department studies have demonstrated the impact of enforcement on compliance. For example, the levels of compensatory use tax paid by New York taxpayers following the highly publicized prosecution of former Tyco executive Dennis Kozlowski in 2002 for use tax evasion by Manhattan District Attorney Robert M. Morgenthau increased approximately $80 million in the two years following Kozlowski’s arrest.

20 | November/December 2009 | NYSBA Journal BURDEN OF PROOF BY DAVID PAUL HOROWITZ

DAVID PAUL HOROWITZ ([email protected] or [email protected]) practices as a plaintiff’s personal injury lawyer in New York and is the author of New York Civil Disclosure (LexisNexis), the 2008 Supplement to Fisch on New York Evidence (Lond Publications), and the Syracuse Law Review annual surveys on Disclosure and Evidence. Mr. Horowitz teaches New York Practice, Evidence, and Electronic Evidence & Discovery at Brooklyn, New York and St. John’s Law Schools. A member of the Office of Court Administration’s CPLR Advisory Committee, he is a frequent lecturer and writer on these subjects.

“To Be Continued . . .”

Introduction exercised due diligence in subpoena- to impeach his own witness, the police A little known fact: This final column ing the witness, and counsel learned officer.9 of 2009 completes five years of “Burden just one week before trial that the wit- It was found to be an abuse of of Proof.” Anyone who knows me, ness was out of the country and unable discretion for Family Court to fail to and my procrastinating ways, will no to return for the trial due to a family adjourn a child custody hearing “to doubt be astounded to learn that I have emergency.4 The appellate court point- provide the attorney for the child with cranked out these columns, issue after ed out that the requested adjournment a reasonable opportunity to present issue, for five years. How was it possi- would only have resulted in a delay of additional witnesses.”10 ble? In a word: continuances.1 The edi- nine days, and would not have preju- tor of the Journal has always accommo- diced the defendant.5 Documents dated my requests for additional time, However, where the request for Another case concerned a plaintiff somehow balancing my needs with the an adjournment is necessitated by a who had requested certain documents requirement that the Journal remain on “lack of due diligence in preparing well before trial.11 On the first day track for timely publication.2 for trial and where the witnesses it of trial, defense counsel turned over Of course, I am not alone in needing intended to call were not identified,” the police officer’s aided report of the the occasional continuance, so this col- it is within the trial court’s discretion accident at issue in the case and was umn reviews the circumstances under to deny the request.6 Thus, it was not still photocopying other documents which an attorney may get a case con- an abuse of discretion for a trial court to exchange with the plaintiff.12 The tinued, or adjourned. to deny “defendant’s request for an plaintiff requested a continuance to adjournment in order to subpoena two permit review of the documents and Grounds for a Continuance unnamed witnesses. . . . Defendant deposition of the police officer. The Trial courts are afforded broad discre- had ample opportunity to compel the trial court denied the request and, tion to grant or deny applications for presence of witnesses on his behalf, thereafter, granted the defendant’s continuances or adjournments: but waited until the eleventh hour, and motion to dismiss the action.13 On A court is vested with broad dis- even then failed to provide the court appeal, the First Department held that, cretion to control its calendar. In with any information on the identity of while a disclosure penalty against the deciding a request for an adjourn- the witnesses or the relevance of their defendant was not warranted based ment, the court should conduct testimony.”7 upon defense counsel’s representation a balanced review of all relevant A request for a six-day continuance, that the late exchange was not inten- factors, including the merit of the so that a criminal defendant could call tional,14 action, prejudice or lack thereof to a police officer to testify concerning a the trial court did improvidently the plaintiff, and whether or not statement he took containing an alleged exercise its discretion by refus- there was an intent to deliberately inconsistency with the complainant’s ing to grant a continuance so that default or abandon the action.3 testimony, was properly denied.8 plaintiff could depose the officer Defense counsel had already exten- who wrote the aided report and Witnesses sively cross-examined the complainant receive and review the documents Applying these factors, the Fourth about the police officer’s write-up. The that defendant was still photocopy- Department recently held it to be an First Department also pointed out that ing on the day of trial. Plaintiff had abuse of discretion to deny a motion the officer had already testified prior requested the documents as long to adjourn a trial in order to secure to trial that the complainant never ago as April 2000, so the need for the attendance of a witness where, the made the allegedly inconsistent state- a continuance was not caused by appellate court found, the witness’s ment and defense counsel would have any lack of due diligence on his testimony was material, counsel had been barred from using the write-up part, and defendant, who stated

NYSBA Journal | November/December 2009 | 21 that it had no objection to pro- Plaintiffs, however, contend that any relevant exhibits, such as any ducing the officer for deposition, the court abused its discretion in deposition testimony, perhaps by would not have been prejudiced by denying their motion for a con- the child or his mother, setting a continuance.15 tinuance pursuant to CPLR 4402 forth their firsthand experience One justice dissented, writing that to enable them to retain a medical or observations of the nature and the trial court had precluded the defen- expert to testify concerning causa- extent of the changes in Tyrone dant from utilizing the aided report tion. since the accident. The record on and from calling the police officer, at * * * appeal is appallingly one-sided, which point plaintiff’s counsel protest- Here, plaintiffs’ request for a con- essentially consisting of the plead- ed that additional documents existed tinuance was not the result of their ings, defendant’s submissions on that the defendant had not exchanged, failure to exercise due diligence. its motion, and the in-court col- so additional disclosure was required.16 To the contrary, they were without loquy, with plaintiffs’ opposition When the trial court refused to permit an expert witness upon the com- limited to a two-page “Brief in 24 further disclosure, plaintiff’s counsel mencement of the trial because the Opposition.”

What if an expert is precluded from testifying at the last minute when opposing counsel makes a motion in limine after jury selection? requested that the trial be adjourned trial court entertained defendant’s Counsel so that the issue could be taken to the motion in limine made after jury Sometimes the attorney’s schedule, appellate division.17 This request was selection. As plaintiffs’ counsel personal or professional, is the prob- also refused, at which time plaintiff’s argued in support of his applica- lem. In an action where defense coun- counsel advised the court she could tion, had defendant’s motion been sel was granted permission to with- not proceed, and the action was dis- made prior to jury selection, plain- draw and then, after the defendant missed.18 The dissenting justice would tiffs would have had the oppor- pro se proceeded to trial and selected have affirmed, finding the denial of tunity to obtain another expert a jury, sought leave to “take the defen- the request for a continuance was an witness. Further, any resulting dant’s case ‘back,’” providing the trial appropriate exercise of discretion, con- delay or waste of judicial resources court agreed to a three-day continu- cluding, “If counsel felt that discovery would not have been the fault of ance (to accommodate the attorney’s was essential plaintiff would have been plaintiffs, because, but for defen- planned vacation), it was not an abuse better served by a request for leave to dant’s motion in limine, they were of discretion to deny the request.25 withdraw the note of issue as opposed prepared for trial.22 to his attorney’s refusal to proceed Tell the Truth with the trial.”19 The dissenting justice would have In Carroll v. Nostra Realty Corp.,26 the reversed as to the preclusion of the plaintiff’s action was dismissed, the Experts expert,23 and offered a little more detail dismissal was affirmed by the First Cases detailing problems with experts on the manner in which defendant’s Department, and the Court of Appeals are legion, and often the wounds motion was made: dismissed the appeal, where an affir- caused by expert difficulties are self- Furthermore, the timing of the mation of engagement was submit- inflicted. However, what if an expert motion and decision are shock- ted on the date jury selection was is precluded from testifying at the last ing; at the end of the court day scheduled to commence. The affirma- minute when opposing counsel makes following the completion of jury tion averred “[t]hat on this date I am a motion in limine after jury selection,20 selection and pretrial proceedings actually on trial in the Supreme Court and the court properly precludes the on March 26, 2007, plaintiffs’ coun- of the State of New York, County of expert from testifying for failing “to sel was presented with this thor- Westchester, in the matter of Christine establish a sufficient evidentiary foun- oughly prepared motion in limine DeLuca v. Catherine Iannuzzi, bearing dation with respect to causation”?21 including 15 exhibits and a legal the Index # 13222/01.” When plaintiff’s counsel requested analysis that had to be responded Unfortunately, the affirmation was a continuance, it was denied. The First to immediately. He was required to not accurate. As the First Department Department held this to be an abuse of counter the legal analysis, without explained: discretion: even time to collect and submit

22 | November/December 2009 | NYSBA Journal On October 11, 2006, Mr. Gold engaged on trial when he is issued the Carroll family. However, con- appeared on another matter in a jury slip. Accordingly, Mr. Gold trary to Mr. Gold’s contention, it Westchester County, was issued a was not actually engaged on trial is not the Court that is denying jury slip on that matter, and was in another matter on October 12, the Carroll family their day in instructed to return on October 16, 2006 since he had not commenced court; Mr. Gold accomplished this 2006 for jury selection. selecting a jury in that case. result when he decided to refuse On October 12, 2006, Mr. Gold’s At a minimum, even if Mr. Gold to appear in Part 40 before Justice partner, Jesse Sable, appeared in believed that he was actually Gammerman as ordered.29 Part 40 before Justice Gammerman engaged on another matter, he with an “affirmation of engage- was required to appear on October Conclusion ment,” in which Mr. Gold affirmed 12, 2006 on this action, and, pur- Requests for continuances often require that he was actually on trial in suant to the Rules of the Chief the court to balance competing inter- another matter. However, the court Administrator of the Courts, per- ests between the parties, which often learned that Mr. Gold was not on mit the courts to determine which collide with the court’s own require- trial on that date, and that the other trial should proceed first.27 ments and goals. For the attorney, matter had been scheduled for jury What about the party whose case successfully requesting or opposing selection on October 16, 2006. The is now dismissed? The trial court, continuances is often more science court then rejected the affirmation observing that “counsel has made his than art. of engagement as misleading, and procrustean bed in egregious misstate- As my first boss instructed when dismissed this action. On appeal, ments to the Court, and must now lie I was sent to obtain a critical trial plaintiffs contend that they demon- in it,”28 acknowledged: adjournment, at the call of the trial cal- strated a reasonable excuse because The court is mindful that this endar I was to stand up and, in a loud their counsel was actually engaged harsh result penalizes the clients, and firm voice, call out “ready.” Next, on trial on October 12, 2006. Section 125.1(b) of the Rules of the Chief Administrator of the Courts states: “[e]ngagement of counsel shall mean actual engagement on trial or in argument before any state or federal trial or appellate court, or in a proceeding conducted pursuant to rule 3405 of the CPLR and the rules promulgated thereunder.” On October 12, 2006, Mr. Gold was not actually engaged on trial or in argument before any court, and as the record reveals, was actually preparing witnesses on another matter. Accordingly, we reject plaintiffs’ contention that they demonstrated a reasonable excuse for failing to proceed to trial in this action. While there is no express definition of the term “on trial” in the applicable rules, it is commonly under- stood that a trial commences with the selection of a jury. In any event, under no reasonable understanding of that term can an attorney who is directed to appear days later to select a jury be considered to be on trial on the day the direction is given. Contrary to plaintiffs’ contention, an attorney is not actually

NYSBA Journal | November/December 2009 | 23 before anyone else could get a word 2. And I suspect that David Wilkes’s generosity 14. Id. in granting continuances was the direct result of the 15. Id. at 406 (citations omitted). in, in an equally loud and firm voice, Herculean efforts of the Journal staffers (especially I was instructed to call out “confer- Joan Fucillo) who were required to convert my 16. Id. at 406–407 (DeGrasse, J., dissenting). ence.” Finally, at the conference, in the child-like scribbles into fine legal prose. 17. Id. at 405. 3. 174 Second Equities Corp. v. Hee Nam Bae, 57 relative privacy of the judge’s robing 18. Id. A.D.3d 319, 321, 869 N.Y.S.2d 433 (1st Dep’t 2008). room and away from the audience in 19. Id. at 407 (DeGrasse, J., dissenting). the TAP Part, I was instructed to beg, 4. Chamberlin v. Dundon, 61 A.D.3d 1378, 877 N.Y.S.2d 579 (4th Dep’t 2009). 20. Guzman v. 4030 Bronx Blvd. Assocs. LLC, 54 plead, and, if necessary, explain I how A.D.3d 42, 861 N.Y.S.2d 298 (1st Dep’t 2008). 5. Id. I would lose my job if my case was not 21. Id. at 51. adjourned. 6. Pinnacle Uptown, LLC v. Asia Banks, 24 Misc. 3d 139(A), 2009 WL 2178435 (App. Term, 1st Dep’t 22. Id. at 52. As long as there have been trials, 2009). 23. Id. at 53 (Saxe, J., dissenting). there have been requests for continu- 7. 174 Second Equities Corp., 57 A.D.3d at 321. 24. Id. (Saxe, J., dissenting). ances, and as long as there have been col- 8. People v. Riley, 57 A.D.3d 379, 869 N.Y.S.2d 25. Garritano v. Garritano, 62 A.D.3d 657, 657, 878 umns like “Burden of Proof,” there have 490 (1st Dep’t 2008), lv. denied, 12 N.Y.3d 820, 881 N.Y.S.2d 402 (2d Dep’t 2009). been requests from authors on deadline N.Y.S.2d 28 (2009). 26. No. 109293-2002, 2007 WL 5274120 (Sup. Ct., 9. Id. for more time. The willingness of courts, N.Y. Co. Feb. 21, 2007), aff’d, 54 A.D.3d 623, 864 under the proper circumstances, to grant 10. Krieger v. Krieger, 65 A.D.3d 1350, 1350, 2009 WL N.Y.S.2d 10 (1st Dep’t 2008), appeal dismissed, 12 continuances, is to be continued. So too 3135655 (2d Dep’t 2009) (citations omitted). N.Y.3d 792, 879 N.Y.S.2d 38 (2009). this column, in 2010. ■ 11. Perez v. City of N.Y., 63 A.D.3d 405, 879 N.Y.S.2d 27. Carroll, 54 A.D.3d at 624 (citations omitted). 455 (1st Dep’t 2009). 28. Carroll, 2007 WL 5274120. 1. As a trial lawyer, my first preference would be 12. Id. at 405. 29. Id. for an adjournment, but with a strict publication deadline, a continuance is the best I can hope for. 13. Id. Are You feeling overwhelmed? The New York State Bar Association’s Lawyer Assistance Program can help.

We understand the competition, constant stress, and high expectations you face as a lawyer, judge or law student. Sometimes the most difficult trials happen outside the court. Unmanaged stress can lead to problems such as substance abuse and depression. NYSBA’s LAP offers free, confidential help. All LAP services are confidential and protected under section 499 of the Judiciary Law. Call 1.800.255.0569

NEW YORK STATE BAR ASSOCIATION LAWYER ASSISTANCE PROGRAM

24 | November/December 2009 | NYSBA Journal STEVEN C. BENNETT (scbennett@ JonesDay.com) is a partner at Jones Day in New York City and Chair of the firm’s E-discovery Committee.

Legal Implications of the Assignment of a Construction Contract By Steven C. Bennett

or lawyers, construction contracting is about the Assignment, Delegation and Novation allocation of risk. The key to dealing with adverse New York law draws distinctions between the “assign- Fdevelopments on a construction project (delay, cost ment,” “delegation” and “novation” of a contract. An overruns, and malfeasance of various sorts) is to identify “assignment” involves the transfer of rights under a risks before the project begins and to deal with foresee- contract.3 A “delegation” involves the appointment of able risks in the contract documents.1 another to perform one’s duties.4 Lawyers may use the One significant risk appears in circumstances where two terms “inartfully,” intending to include delegation a participant in a project (often a contractor or subcon- within the term assignment.5 The distinction, however, tractor) cannot perform work as originally planned, or is important. Generally, “when rights are assigned, the wishes to transfer its right to compensation to another assignor’s interest in the rights assigned comes to an end. party. In those circumstances, a party may attempt to When duties are delegated, however, the delegant’s obli- designate a replacement.2 This article explores the legal gation does not end.”6 Thus, although “most obligations implications of assignment of a construction contract for can be delegated,” the act of delegation “does not relieve the parties involved.

NYSBA Journal | November/December 2009 | 25 the delegant of the ultimate responsibility to see that the contract” (i.e., compensation for goods and services obligation is performed.”7 provided).14 A “novation,” by contrast, may “discharge the duty But what is a “personal” contract, whose duties can- of the delegating party,” but only where the obligee not be delegated? The Devlin Court noted that the answer expressly “release[s] the delegating party, in exchange would depend upon “the nature of the contract and the for the new liability of the delegate.”8 Because a nova- character of the obligations assumed.”15 Thus, under New tion actually discharges all duties of the original obligor, York law, the characterization of a contract as “personal” leaving the obligee solely to obtain performance from is a question of fact.16 Where a contract requires “personal the recipient of the delegated obligation, “there must be trust and confidence” in the performance of a party, such a clear and definite intention” expressed, on the part of duties may not be delegated.17 A contract for the employ-

Although an obligor may delegate performance to another, it cannot escape the obligation to ensure that performance is properly completed. all parties involved, that such is the purpose of an agreement of an attorney, for example, is personal.18 And a ment.9 Absent a clear novation, a principal obligor “has a contract that involves skill, judgment, integrity and repu- continuing liability,” even if the assignment of rights and tation, such as between an author and a publisher, may delegation of duties is otherwise valid.10 be considered personal.19 By contrast, obligations under a contract that do not involve “any personal relationship Limits on Delegation or skill” may be delegated.20 In New York, “most obligations can be delegated as long Contracts related to construction may vary widely as performance by the delegate will not vary materially in the degree to which they may be characterized as from performance by the delegant.”11 The classic case “personal.” Thus, in New York, numerous construction- that stands for this proposition is Devlin v. Mayor of the related contracts have been held not to be “personal.”21 City of New York.12 In Devlin, a contractor agreed to sweep Various similar examples appear in other states.22 Despite the streets of the city, but later assigned its rights and this trend in the cases, however, there may be circum- obligations to another contractor. The city claimed that stances where, due to the special skill or science called the contract terminated because the original contractor for in a construction contract, performance of the contract did not personally perform, even though the replacement may be deemed “personal,” and not subject to delegation contractor performed adequately until termination by the or assignment.23 city. The New York Court of Appeals held that, at very least, the substitute contractor was entitled to payment Liability for Duty to Perform the Obligation for the work performed.13 The Court continued, noting Although an obligor may delegate performance to anoth- that delegation of duties would not generally result in an er, it cannot escape the obligation to ensure that perfor- automatic termination of a contract: mance is properly completed.24 In Devlin, for example, the If the service to be rendered or the condition to be Court held that, although the contract obligations could performed is not necessarily personal, and such as can be delegated, the original contractor “was at no time dis- only with due regard to the intent of the parties, and charged from his obligations” under the contract.25 the rights of the adverse party, be rendered or performed by the original contracting party, and the latter Liability for Negligence has not disqualified himself from the performance of A contractor assigning work may be obligated to see that the contract, the mere fact that the individual repre- the project is completed, but the assigning contractor is senting and acting for him is the assignee, and not the generally not liable for the negligence of the assignee.26 mere agent or servant, will not operate as a rescission Thus, general contractors are most often held not respon- of, or constitute a cause for terminating the contract. sible for the negligence of their subcontractors.27 The In short, under the Devlin rule, unless the contract New York Court of Appeals has held that performance is “personal,” the performance (absent mere retention of the power of general supervision to contract limitations) should be freely delegable to anoth- see that the over-all work proceeds properly and to er. If, thereafter, the contract is properly performed, coordinate the actions of several subcontractors on the then the substituted party may “have the benefit of the site will not ordinarily cast [a party] in damages for

26 | November/December 2009 | NYSBA Journal the negligence of any of the latter. Nor is the general injuries because they had notice that a dangerous condi- contractor obliged to protect employees of his subcon- tion existed.36 The Court held: “An independent general tractors against the negligence of his employer or that contractor, who is present and sees and realizes that a of a fellow servant.28 subcontractor is doing his work in an unlawful and Another New York court has held that, when work is dangerous manner, may be liable for an injury resulting delegated to a third party, the third party becomes a directly to a third person from such unlawful and negli- “statutory ‘agent’ of the owner or general contractor” and gent conduct.”37 has the authority to supervise and control the work. The court noted: “To hold otherwise and impose a nondelega- Assignment of Payments ble duty upon each contractor for all injuries occurring on Subcontractors, especially smaller or newer companies, a job site and thereby making each contractor an insurer may have difficulty financing their work, even before for all workers regardless of the ability to direct, super- a job is done.38 Further, subcontractors who have com- vise and control those workers would lead to improbable pleted projects may prefer not to await payment from the and unjust results.”29 principal contractor, choosing instead to sell (or “factor”) Several exceptions apply to the general rule of non- their accounts receivable.39 As a matter of public policy, liability. Liability may exist where the employer is under under the Uniform Commercial Code, arrangements a statutory duty to perform or guard the work, or where that permit such financing are encouraged, and contract the employer has assumed a contractual obligation to provisions preventing assignment of payments to permit perform the work, or where the employer is under a duty such financing are void.40 to keep the premises safe, or where readily foreseeable Further, to the extent that work has been performed on danger is inherent in or created by the work assigned to a project, the right to receive compensation for prior work the contractor.30 under the contract is assignable, even if the remaining One exception to the general rule appears in New work cannot be delegated.41 In circumstances where an York Labor Law § 240.31 The law requires that owners owner terminates a general contractor but nevertheless secure ladders and scaffolding at construction sites, and permits a subcontractor to continue to provide service an owner may be held liable for injuries to employees on the project, the subcontractor may be held to have a of subcontractors from unsecured ladders.32 In Broderick lien on the proceeds of any amounts owed the general v. Cauldwell-Wingate, Co.,33 an employee of a carpentry contractor (including amounts owed for services by the subcontractor suffered severe injuries when a platform subcontractor).42 collapsed. The court ordered a new trial to determine whether the general contractor could be held liable for Drafting Issues telling an employee that the platform was “all right” Parties are generally free to specify, in their contracts, and to “[g]o ahead,” after the employee questioned the whether some or all of the rights and obligations under platform’s safety. As the Broderick court noted, a general the contract may be transferred to others. Specificity in the contractor cannot escape liability from a subcontractor’s language of the contract, however, is essential. Thus, for employee if it “assumes control and gives specific instructions which necessarily involve the safety of the subcontractor’s men.”34 A New York Court of Appeals case from the 1940s, Schwartz v. Merola,35 concerned an owner who entered into a contract with a general contractor to renovate a building. The general contractor entered into a contract with a subcontractor for tiling and terrazzo pebble work. The plaintiff was injured when a bag of terrazzo pebbles that the subcontractor piled on the sidewalk outside the building fell on him. The second assignee was primarily responsible for the accident, but the owner, the general contractor, and the assignor subcontractor were all held liable for the plaintiff’s

NYSBA Journal | November/December 2009 | 27 4. See Assocs. Capital Servs. Corp. of N.J. v. Fairway Private Cars, Inc., 590 F. example, even where an agreement stated that it would Supp. 10, 17 (E.D.N.Y. 1982) (assignment was “solely of rights, and not a del- bind “successors and assigns” of the parties, the Court of egation of duties”). Appeals held that the contract was “personal,” and thus 5. See Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 924 (2d could not be assigned.43 Similarly, reference to assign- Cir. 1977); see also Aetna Cas. & Surety Co. v. Aniero Concrete Co., 404 F.3d 566, 569 (2d Cir. 2005) (rejecting claim that terms “assignment” and “delegation” ment of the “benefits and burdens” of a contract would were “interchangeable”); Viacom Int’l, Inc. v. Tandem Prods., Inc., 526 F.2d 593, 596 n.6 (2d Cir. 1975) (noting “distinction to be drawn between the assignment of a party’s rights under a contract and a delegation of the party’s duties,” and noting that “attorneys do not always utilize the skills of contract draftsmanship required” to recognize this “subtle distinction”). If parties intend that any 6. Contemporary Mission, 557 F.2d at 924 (quoting 3 Williston on Contracts) (noting that rule is “obvious” as “otherwise obligors would find an easy practi- assignment be rendered “void,” cal way of escaping their obligations). 7. Id. (“[i]f the delegate fails to perform, the delegant remains liable”); see they should so state expressly also Quintel Corp., N.V. v. Citibank, N.A., 596 F. Supp. 797, 800 (S.D.N.Y. 1984) (where obligee accepted “assignment” of obligor’s “rights and duties,” obligor in their agreement. nevertheless “remained liable for the obligations”). 8. Holland v. Fahnestock & Co., 210 F.R.D. 487, 490 (S.D.N.Y. 2002) (quotation omitted). not necessarily authorize a delegation of all “rights and 9. Yahaya v. Hua, 1989 WL 214481 at *4, No. 87 Civ 7309 (CES) (S.D.N.Y. obligations” under the agreement.44 The inclusion of a Nov. 28, 1989); see also Holland v. Fahnestock & Co., 2002 WL 1774230 at *9, No. 01Civ.2462RMBAJP (S.D.N.Y. Aug. 1, 2002) (absent “express discharge” of obli- contract term permitting “assignment,” moreover, would gations, “assignment” constituted consent to delegation of duties, but did not not alone suffice to create a novation.45 discharge original obligor). Similarly, parties may, by the express terms of a con- 10. See McSpadden v. Dawson, 117 A.D.2d 453, 458 n.2, 503 N.Y.S.2d 357 (1st tract, make performance under a contract “personal,” Dep’t 1986); Toroy Realty Corp. v. Ronka Realty Corp., 113 A.D.2d 882, 883, 493 N.Y.S.2d 800 (2d Dep’t 1985) (“assignor cannot relieve himself of all obligations such that rights and obligations under the contract cannot under the contract absent a release or novation”). be assigned or delegated (or require consent to any such 11. Contemporary Mission, 557 F.2d at 924. transfer). Yet, such limitations may import ambiguity into 12. The complete title is Devlin v. The Mayor, Aldermen & Commonality of the the relationship. A general term forbidding “assignment” City of New York, 63 N.Y. 8 (1875). of an agreement, for example, could prohibit a contractor 13. Id. (noting “liberal” rule permitting “assignment” of rights to payment). from delegating performance of duties, or it could aim Thus, “even if the contract had been terminated for every other purpose,” the only at assignment of payments under the contract.46 replacement contractor would be entitled to payment. Id. The American Institute of Architects (AIA) offers a 14. Id. (noting that “[p]arties may, in terms, prohibit the assignment of any contract and declare that neither personal representatives nor assignees shall standard form provision in its suggested contracts to the succeed to any rights in virtue of it, or be bound by its obligations”). effect that “neither party to the Contract shall assign the 15. Devlin, 63 N.Y. at 17. In Devlin, for example, the street sweeping contract Contract as a whole without written consent of the other. involved “servile labor,” and the contractor was expected to “employ work- If either party attempts to make such an assignment with- men and appoint agents and overseers of the work.” Id. The Devlin court, moreover, noted that work upon “the canals of this State, either in their repair out such consent, that party shall nevertheless remain or construction,” was delegable. legally responsible for all obligations under the con- 16. See In re Noonan, 17 B.R. 793, 798 (Bankr. S.D.N.Y. 1982) (determination tract.”47 This provision, according to one commentator, depends upon “sui generis” attributes of the performance). makes the “classic mistake” of not precluding assignabil- 17. Paige v. Faure, 229 N.Y. 114, 119, 127 N.E. 898 (1920) (exclusive agency obli- ity but merely stating that neither party “shall assign.” gations could not be delegated). The final sentence of the provision, moreover, actually 18. See Wilkerson v. City of Utica, 59 Misc. 2d 864, 865, 300 N.Y.S.2d 693 (Sup. Ct., Oneida Co. 1969) (“A contract for the employment of an attorney to pro- contemplates the possibility of an assignment, and states vide legal services is personal in nature, and terminates upon the death of the the consequence in that event.48 Thus, if parties intend attorney.”). that any assignment be rendered “void,” they should so 19. See In re Waterson, Berlin & Snyder Co., 36 F.2d 94, 96 (S.D.N.Y. 1929) (con- state expressly in their agreement.49 ■ tract with composer or author cannot be delegated without consent), rev’d & remanded on other grounds, 48 F.2d 704 (2d Cir. 1931). 1. See generally Mark H. McCallum, A Quick Primer on Construction Risks 20. Seligman & Latz, Inc. v. Noonan, 201 Misc. 96, 99, 104 N.Y.S.2d 35 (Sup. and Contracting Practices, at 2 (2000), www.people.umass.edu (risk is an Ct., Monroe Co. 1951) (contract to train party as an operator in a beauty salon “inherent and expected part” of the construction process). required “special skill and peculiar qualifications,” making it personal). 2. See generally Philip L. Bruner & Patrick J. O’Connor, Bruner and O’Connor 21. See, e.g., New England Iron Co. v. Gilbert Elevated R. Co., 91 N.Y. 153 (1883) on Construction Law § 5:245 (2009) (“The assignment of contractual rights is a (contract to build railway); Wetter v. Kleinert, 139 A.D. 220, 123 N.Y.S 755 (2d regular occurrence on construction projects.”). Dep’t 1910) (contract for demolition of buildings); Janvey v. Loketz, 122 A.D. 411, 3. See MSF Holding Ltd. v. Fiduciary Trust Co. Int’l, 435 F. Supp. 2d 285 (S.D.N.Y. 106 N.Y.S. 690 (2d Dep’t 1907) (contract to decorate dwelling); Levy v. Cohen, 103 2006) (“assignment” of letter of credit did not include “transfer or delegation of A.D. 195, 92 N.Y.S. 1074 (1st Dep’t 1905) (contract to build synagogue); Brewster any duties”); Nationwide Mech. Contractors Corp. v. Hokkaido Takushoku Bank Ltd., v. City of Hornellsville, 35 A.D. 161, 54 N.Y.S. 904 (4th Dep’t 1898) (paving of 188 A.D.2d 871, 591 N.Y.S.2d 578, 580 (3d Dep’t 1992) (assignment of contract municipal streets). rights to lenders as security “could not impose” performance obligations upon 22. See, e.g., Decatur N. Assocs., Ltd. v. Builders Glass, Inc., 180 Ga. App. 862, 350 lenders). S.E.2d 795, 798 (Ga. Ct. App. 1986) (recaulking of windows on a building did not involve “personal confidences” of the parties); Madison v. Moon, 148 Cal.

28 | November/December 2009 | NYSBA Journal App. 2d 135, 306 P.2d 15, 21 (Cal. Dist. Ct. App. 1957) (contract for construc- ment) (quoting Official Comment to UCC 9-318(4)); see generally 95 N.Y. Jur.2d, tion of road was assignable); In re Estate of Stormer, 385 Pa. 382, 386, 123 A.2d Secured Transactions § 239 (2009) (anti-assignment clause that contradicts UCC 627 (Penn. Sup. Ct. 1956) (where construction documents “specify in detail the “is of no effect whatsoever”; the prohibited assignment “does not constitute a type and quality of the material to be used in the work, what the work was to default”). The assignment of payment rights to a lender, however, does not consist of, where it was to be done, and the general methods of construction,” impose obligations on the lender with regard to completion of a project. See leaving only the “mechanical details of excavation and construction,” contract Nationwide Mech. Contr. Corp. v. Hokkaido Takushoku Bank Ltd., 188 A.D.2d 811, was assignable); Taylor v. Palmer, 31 Cal. 240, 247 (1866) (“the workmanlike dig- 591 N.Y.S.2d 578 (3d Dep’t 1992). ging down of a sand hill, or the filling up of a depression to a given level” does 41. See Knudsen v. Torrington Co., 254 F.2d 283, 285 (2d Cir. 1958) (“Regardless not require “rare genius and extraordinary skill,” such as to make a contract of whether the duties under the contract were delegable, the plaintiff was personal). entitled to receive commissions for orders [previously] obtained.”). 23. See, e.g., Devlin v. Mayor of the City of N.Y., 63 N.Y. 8 (1875) (noting that 42. See Tibbetts Constr. Corp. v. O & E Contr. Co., 15 N.Y.2d 324, 258 N.Y.S.2d 400 there “may be cases” where “personal skill and science” aspects of the contract (1965) (owner could not “accept performance” by subcontractor “at the same preclude delegation) (citing example of English case involving construction time disclaiming obligation” to subcontractor, on ground that subcontractor of a light-house); Johnson v. Vickers, 139 Wis. 145, 145, 120 N.W. 837 (Wis. Sup. was working for general contractor “and could look solely” to general contrac- Ct. 1909) (contract to build canning factory “undoubtedly required skill and tor for payment); but see Data Elec. Co. v. NAB Constr. Co., 52 A.D.2d 779, 383 experience, and upon its proper execution the success of the enterprise might N.Y.S.2d 14 (1st Dep’t 1976) (citing Tibbetts and noting that, in case at bar, “no well depend”); Swarts v. Narragansett Elec. Lighting Co., 26 R.I. 388, 388, 59 A. privity” existed between owner and general contractor’s subcontractor, despite 77 (R.I. Sup. Ct. 1904) (parties bargained for “a man highly skilled in the work claim that owner “supervised and directed” subcontractor’s work). of installing electric apparatus”; the “nature of the work to be done” implied “personal service”). 43. See Paige v. Faure, 229 N.Y. 114, 127 N.E. 898 (1920) (contract for exclusive agency contemplated that parties would “personally . . . devote their time to 24. Toroy Realty Corp. v. Ronka Realty Corp., 113 A.D.2d 882, 883, 493 N.Y.S.2d carrying out its terms”). Such language, moreover, would not suffice to permit 800 (2d Dep’t 1985) (“the assignor cannot relieve himself of all obligations the delegation of duties under a contract. See Hugel v. Habel, 132 A.D. 327, 117 under the contract absent a release or novation”); see County of Sullivan v. State N.Y.S. 78 (1st Dep’t 1909). Such language might, however, indicate that rights of N.Y., 135 Misc. 2d 810, 815, 517 N.Y.S.2d 671 (Ct. Cl. 1987), aff’d, 137 A.D.2d under a contract were meant to be freely assignable. See Harris v. Key Bank Nat’l 165, 528 N.Y.S.2d 227 (3d Dep’t 1988); see generally Restatement (Second) of Assoc., 193 F. Supp. 2d 707, 710 (W.D.N.Y. 2002) (reference to “successors, legal Contracts § 318(3) (1981) (“Unless the obligee agrees otherwise, neither delega- representatives and assigns” indicated right to assign note and mortgage to a tion of performance nor a contract to assume the duty made with the obligor third party), aff’d, 51 Fed. Appx. 346 (2d Cir. 2002). by the person delegated discharges any duty or liability of the delegating obligor.”). 44. See Kier Constr. v. Raytheon Co., No. Civ. A. 19526, 2005 WL 628498 (Del. Ch. Mar. 14, 2005) (applying New York law). 25. Devlin, 63 N.Y. at 16; Tarolli v. Syracuse Inv. Corp., 151 Misc. 634, 271 N.Y.S. 871 (1st Dep’t) (assumption of obligations under mortgage did not release 45. See Viacom Int’l Inc. v. Tandem Prods., Inc., 526 F.2d 593, 596 (2d Cir. 1975) obligations of original mortgagor), aff’d, 241 A.D. 912, 271 N.Y.S. 879 (4th Dep’t (to constitute a novation, “a contract must discharge a previous contractual 1934); 500 Fifth Ave., Inc. v. Nielsen, 56 Misc. 2d 392, 288 N.Y.S.2d 970 (N.Y. Co. duty, create a new contractual duty, and add a party who neither owed nor Civ. Ct. 1968) (assignment of lease did not discharge lessee’s obligations to was entitled to its performance”); see also Mallad Constr. Corp. v. County Fed. Sav. landlord). & Loan Assoc., 32 N.Y.2d 285, 289, 344 N.Y.S.2d 925 (1973) (where agreement provided for “revocation and cancellation of the prior agreement,” novation 26. See generally 2A N.Y. Jur. 2d Agency § 436 (1998). existed). 27. Broderick v. Cauldwell-Wingate Co., 301 N.Y. 182, 187, 93 N.E.2d 629 (1950). 46. See Richard A. Lord, Williston on Contracts § 74:39 (2009) (such a term is a 28. Id. (citations omitted). “matter of interpretation”). 29. Russin v. Louis N. Picciano & Son, 54 N.Y.2d 311, 318, 445 N.Y.S.2d 127 47. See AIA Form A201, www.aia.org (2007) (Section 13.2.1, regarding assign- (1981); see also Paone v. Westwood Vill., 178 A.D.2d 518, 520, 577 N.Y.S.2d 442 (2d ment). A related provision (Section 5.4) permits the assignment of subcontracts Dep’t 1991). to the owner, if the general contractor is terminated “for cause.” See Sean R. Calvert, That’s Mine: A Contractor’s View on Termination, at 6 (2008), www. 30. McCleery v. Sears Roebuck & Co., 98 N.Y.S.2d 283, 286 (N.Y. Co. City Ct. abanet.org (provision gives the owner “ability to selectively accept assign- 1950). ment of the subcontracts,” but to “avoid having to negotiate with existing or 31. N.Y. Labor Law § 240. replacement subcontractors for completion of the work at prices in excess of 32. See Goodrich v. Watermill, 169 Misc. 2d 314, 645 N.Y.S.2d 721 (Sup. Ct., the original subcontract costs”). Ulster Co. 1996). 48. See Jonathan J. Sweet, Sweet on Construction Industry Contracts: Major 33. Broderick, 301 N.Y. 182. AIA Documents § 17.07 at 770 (5th ed. 2009) (“Sweet”) (“a promise not to assign may be the basis for a breach [claim] but it does not invalidate the 34. Id. at 187. assignment”); see also Restatement (Second) of Contracts § 317 (“A contract 35. 290 N.Y. 145, 48 N.E.2d 299 (1943). term prohibiting assignment of rights under the contract, unless a different intention is manifested . . . gives the obligor a right to damages for breach of the 36. Id. at 151. terms forbidding assignment but does not render the assignment ineffective.”). 37. Id. at 152 (citing Rosenberg v. Schwartz, 260 N.Y. 162, 166, 183 N.E. 282 As the Sweet treatise notes, moreover, the AIA “must have been aware” of the (1932)). UCC provisions that invalidate clauses that do not permit assignment of mon- 38. See Spellman v. Shawmut Woodworking & Supply, Inc., 445 Mass. 675, 682 n.9, ies due, or creation of a security interest in such payments. See Sweet; see also 840 N.E.2d 47 (Mass. Sup. Jud. Ct. 2006) (noting “significant financial exposure Charles R. Heuer & Howard G. Goldberg, Commentary on AIA Document A201- faced by subcontractors,” and holding that assignment of payments is permis- 1997, at 92, available at www.aia.org (1999) (“At times, a contractor may want to sible). assign to a major creditor money due or to become due under the contract. This is not prohibited by [AIA § 13.2.1] since it is only an assignment of the right to 39. See Quantum Corp. Funding, Ltd. v. Westway Indus., Inc., 4 N.Y.3d 211, 791 receive money and not an assignment of the contract as a whole.”). N.Y.S.2d 876 (2005) (describing “typical” subcontractor situation). 49. Oliver/Hatcher Constr. & Dev., Inc. v. Shain Park Assocs., No. 275500, 2008 40. See Quantum Corp. Funding, Ltd. v. Fid. & Deposit Co. of Md., 285 A.D.2d WL 2151716 (Mich. Ct. App. May 22, 2008) (interpreting AIA form, and finding 376, 378, 685 N.Y.S.2d 688 (1st Dep’t 1999) (citing UCC 9-318(4)) (“That statute assignment not “void”); TRST Atlanta, Inc. v. 1815 The Exchange, Inc., 220 Ga. renders void any term in a contract between an account debtor and an assignor App. 184, 469 S.E.2d 238, 240–41 (Ga. Ct. App. 1996) (AIA form “anticipates” prohibiting assignment of an account or the creation of a security interest or assignments); see also Folgers Architects Ltd. v. Kerns, 262 Neb. 530, 633 N.W.2d requiring prior consent to assignment or the creation of a security interest.”); 114, 126 (Neb. Sup. Ct. 2001) (despite provision precluding assignment, intent of Aetna Cas. & Surety Co. v. Bedford-Stuyvesant Restoration Constr. Corp., 90 A.D.2d provision is not affected by permitting assignment of right to collect damages). 474, 455 N.Y.S.2d 265 (1st Dep’t 1982) (assignment effective, even if assignee took with “full knowledge” that account debtor had sought to prohibit assign-

NYSBA Journal | November/December 2009 | 29 Statutory Damages in Copyright Litigation By Andrew Berger

tatutory damages, although a potent weapon in This article attempts to clear up these misunderstand- copyright litigation, are often a trap for the unwary.1 ing and explains the uncertainties so that all parties may SThe Copyright Act of 1976 (the “Act”) limits the better assess the statutory damages that may be awarded availability of statutory damages, the number of grants in copyright litigation. of statutory damages to be awarded and the parties against whom those grants will be individually assessed.2 Post-Registration Infringing Conduct That The Act also impacts on the availability of actual dam- Commenced Pre-Registration ages when the copyright owner elects statutory damages Title 17, § 412(2) of the U.S.C., with one exception not before the entry of final judgment.3 Further, the Act limits relevant here, prohibits recovery of statutory damages for the range of statutory damages to be awarded depending infringements of a work that commence before the work on whether the infringement was innocent, non-willful is registered.10 But this section is silent about whether or willful.4 a copyright owner may recover statutory damages for Litigants on both sides of the fence sometimes misun- infringements of that work that continue after registra- derstand these limits. Copyright owners mistakenly seek tion. Courts usually say no. The majority hold that the statutory damages for post-registration infringements copyright owner is not entitled to statutory damages of a work that continue the pattern of pre-registration for the continuation of post-registration infringements infringement of the same work.5 Where multiple infring- that commenced pre-registration.11 Copyright owners ers acting in concert infringe one work multiple times, who attempt to avoid this result argue that the post- some copyright owners wrongly believe they are entitled registration infringements are new, different and separate to multiple awards of statutory damages individually and thus are wholly divorced from the pattern of pre- assessed against each infringer.6 registration infringements of the same work. Further, defendants sometimes incorrectly assert that the unauthorized infringing compilations they create from a plaintiff’s separate, copyrightable works are sub- ANDREW BERGER ([email protected]) is counsel to the New York law ject to only one award of statutory damages.7 Also, copy- firm of Tannenbaum Helpern Syracuse & Hirschtritt LLP. He graduated right owners who elect to receive an award of statutory from Cornell University and Cornell Law School. A shortened version of damages mistakenly believe they can still raise issues on this article appeared in 78 BNA Patent, Trademark & Copyright Journal at appeal regarding actual damages.8 Finally, parties are p. 391, published July 24, 2009. That version is also posted on the ABA sometimes uncertain where in the spectrum from inno- Section of Litigation Web site at http://www.abanet.org/litigation/ cence to willfulness infringing conduct falls and the statu- committees/intellectual/articles.html. tory damages that will be assessed for that conduct.9

30 | November/December 2009 | NYSBA Journal This argument usually fails. Courts interpret the whether it makes one copy of a copyrighted painting or words “infringement . . . commenced after the first pub- one thousand and whether it performs the copyrighted lication” in § 412(2) to mean “the first act in a series of work once or nightly over a period of months.”22 acts.”12 Further, Mason v. Montgomery Data, Inc.13 adopted The copyright owner remains restricted to one award a bright-line rule that most circuits have followed. Mason of statutory damages against multiple infringers where prohibited claims for statutory damages for a defendant’s they act in concert and are therefore jointly and severally post-registration infringements of a work “if the same liable.23 Section 504(c)(1) relies on the common law to defendant commenced an infringement of the same work define joint or several liability. Those principles do not prior to registration.”14 depend on whether the defendants engaged in the same Mason relied on the legislative history of § 412, which act or exhibited the same level of willfulness.24 The Act “is revealed “Congress’ intent that statutory damages be unconcerned about gradations of blameworthiness.”25 denied not only for the particular infringement that a defendant commenced before registration, but for all of Multiple Awards for Unauthorized Compilations of that defendant’s infringements of a work if one of those Separately Copyrighted Works infringements commenced prior to registration.”15 The Confusion also surrounds the limitation on the number of purpose of § 412 was to encourage early registration and statutory damages that may be assessed for infringement “‘[t]he threat of such a denial [of statutory damages] of a compilation or a derivative work. The limitation is would hardly provide a significant motivation to register contained in the last sentence of 17 U.S.C. § 504(c)(1), which early if the owner of the work could obtain those rem- provides that “all the parts of a compilation or derivative edies for acts of infringement taking place after a belated work constitute one work.”26 registration.’”16 The confusion arises from the “facial” ambiguity in Since Mason, courts bar statutory damages for post- this limitation.27 It is unclear whether the phrase “com- registration infringements even if they differ from the pilation or derivative work” refers to the copyrighted infringements pre-registration. In Shady Records, Inc. v. work that the plaintiff creates, which is then infringed, or Source Enterprise, Inc., the district court noted that “[t]he the infringing work the defendant creates from multiple, clear rule announced in Mason which is easily applied to separately copyrightable works of the plaintiff. preclude statutory damages . . . [is] where any infringe- Most courts assume, without extensive discussion, ment occurs before the effective date of the work’s copy- that the one-work limitation refers to a plaintiff-created right registration is preferable.”17 compilation or derivative work.28 Thus, where record Nimmer on Copyright suggests that a plaintiff might be labels made CDs containing multiple copyrighted songs able to recover statutory damages if a “qualitative new that the defendant infringed, courts awarded the labels infringement occurs after registration” along with “a one grant of statutory damages.29 Where the defen- large lapse of time between the first bout of infringement dant infringed a plaintiff-crafted compilation of clip-art and its post-registration successor.”18 But no case has images, a court reached the same conclusion.30 Similarly, been found that has adopted this view. where the defendant copied 122 photographs from a catalogue that the plaintiff put together, the plaintiff was One Award Against Those Who Act in Concert limited to one grant of statutory damages.31 Another misconception concerns the number of awards But in Greenberg v. National Geographic Society, the of statutory damages to which a copyright owner may be district court found that the “compilation” referenced in entitled. Copyright owners often believe they merit mul- § 504(c)(1) was the infringing work the defendant created tiple awards of statutory damages for multiple infringe- from multiple, separately copyrightable works of the ments by multiple parties acting in concert.19 But the Act plaintiff. There, the defendant took 64 of the plaintiff’s limits a copyright owner to one grant of statutory dam- copyrighted photographs and published them in four ages in that circumstance. magazine compilations the defendant created. The court The section provides that a copyright owner “may nevertheless limited Greenberg to only four awards of elect . . . to recover . . . an award of statutory damages for statutory damages.32 all infringements involved in the action with respect to WB Music Corp. v. RTV Communication Group, Inc. any one work . . . for which any one infringer is liable has now resolved the ambiguity, at least in the Second individually or for which any two or more infringers are Circuit. The court found that the phrase “compilation or liable jointly or severally.”20 derivative work” in the last sentence of § 504(c)(1) refers The copyright owner is restricted to one award of to a work created by a plaintiff.33 Thus, the court held statutory damages regardless of the number of acts of that the one-work limitation is inapplicable if the defen- infringement, whether they are separate, isolated or dant creates the infringing compilation or unauthorized occurring over many years.21 As Goldstein aptly states, derivative work from multiple, separately copyrighted “an infringer will be liable for a single statutory award works of the plaintiff.34

NYSBA Journal | November/December 2009 | 31 There, the defendant copied 13 of the plaintiff’s copy- The uncertainty begins with the absence of a defini- righted songs onto seven CDs. The district court found tion of willfulness in the Act. Courts hold that a defen- that the plaintiff was entitled to seven awards of statutory dant was willful if it knew its conduct was infringing or damages.35 acted with reckless disregard for the copyright owner’s rights,42 but it is often difficult to predict whether infringing conducts falls within that definition.43 Here are a few guidelines that may assist in deter- Confusion also exists about mining willfulness: Willfulness will be found where a the amount of statutory defendant continues infringement in defiance of a court order.44 Willfulness may be found where a defendant damages to be awarded. continues to infringe after being warned to stop that conduct.45 But a defendant who has been warned may avoid a willfulness finding by demonstrating that it reasonably The Second Circuit reversed, holding that the limita- and in good faith believed its continuing conduct was tion is triggered only by an infringement of a plaintiff- not infringing.46 Further, the good-faith belief may be evi- created compilation or derivative work. The court stated, denced by an unsuccessful fair use defense if that belief “[T]here is no evidence that any of [the plaintiff’s] was objectively reasonable.47 separately copyrighted works [that were infringed] were included in a compilation authorized by the copyright Absence of Statutory Guidelines owners. Rather, the [infringing] compilations were cre- Whether non-willful or willful conduct is found, confu- ated by the defendants.”36 Accordingly, the court held sion also exists about the amount of statutory damages that the plaintiff was entitled to an award of statu- to be awarded. There are no guidelines in the Act assist- tory damages for each of the 13 songs that the defendant ing courts in fixing statutory damages. There is only one infringed.37 statutory requirement: The award must be “just.”48

Election Moots All Issues Regarding Actual Damages Wide Discretion There is another restriction that sometimes confuses copy- Courts have wide discretion to weigh the factors they right owners: the impact on actual damages on appeal examine in setting statutory damages. These factors arising from an election to receive statutory damages. include: (1) any revenues the plaintiff may have lost as Section 504(c) permits a copyright owner at any time a result of the infringement; (2) the expenses saved or before final judgment is entered to choose between two the profits gained by the defendant in connection with types of damages: actual damages or statutory dam- the infringement; (3) the value or nature of the plaintiff’s ages. This means that a copyright owner may ask a jury copyrights; (4) the need to deter the defendant and others to award actual damages and, if the copyright owner is similarly situated from committing future infringements; dissatisfied with the award, then ask the court to assess (5) the defendant’s financial situation; (6) the defendant’s statutory damages.38 But once the election is made to state of mind; and (7) in the case of willful infringement, accept statutory damages, copyright owners often do not the need to punish the defendant.49 realize they have forfeited the right to seek actual dam- Courts may give whatever weight they wish to each ages on appeal. As Jordan v. Time, Inc. holds, there are no factor and may consider all, some or none of them.50 For two “bites of the apple.”39 example, some courts focus on the actual damages the In Jordan, a jury awarded the plaintiff actual damages plaintiff suffered as a result of the infringement. These of $5,000. Before the entry of final judgment, the plain- courts state “statutory damages should bear some rela- tiff requested that the court, pursuant to § 504(c), assess tion to actual damages suffered”51 and set statutory dam- statutory damages, and the plaintiff was awarded $5,500. ages at a multiple of actual damages.52 The Eleventh Circuit dismissed the appeal of the actual Other courts decline to base statutory damages on damage award, stating, “[a] plaintiff is precluded from a multiplier of actual damages. For example, in UMG electing statutory damages and then appealing the award Recordings, Inc. v. MP3.com, Inc., the court stated that of actual damages,” adding “once a timely election is “any attempt to reduce this determination [of the amount made to receive statutory damages all questions regard- of statutory damages] to some kind of mathematical ing actual and other damages are rendered moot.”40 formula or equation is spurious.”53 Although UMG considered a number of factors in assessing the amount of Areas of Uncertainty statutory damages to be awarded, that case calibrated Finally, parties are sometimes uncertain whether infring- statutory damages primarily to deter future infringing ing conduct was innocent, non-willful or willful and the conduct. The court stated that “[s]tatutory damages amount of statutory damages to be assessed.41 . . . [of] approximately $118,000,000” would be warranted

32 | November/December 2009 | NYSBA Journal multiple times. That last sentence of this section also provides for one grant of because “the potential for huge profits in the rapidly statutory damages where a plaintiff-created compilation or derivative work is expanding world of the Internet is the lure that tempted infringed by defendant. . . . MP3.com to break the law and that will also tempt 3. Courts construing 17 U.S.C. § 504(c)(1) hold that, once plaintiff elects to others to do so if too low a level is set for the statutory receive statutory damages at any time before the entry of final judgment, all 54 appellate issues regarding actual damages are mooted. See, e.g., Jordan v. Time, damages in this case.” The court in Lowry’s Reports, Inc. Inc., 111 F.3d 102, 104 (11th Cir. 1997). v. Legg Mason, Inc. affirmed the jury’s statutory dam- 4. 17 U.S.C. § 504(c)(1) provides for a range of statutory damages for ordi- age award of $19.7 million, even though the defendant nary non-willful infringement of between $750 and $30,000. Section 504(c)(2) argued “the actual harm” from the infringements was provides an enhanced range for willful infringement of between $30,000 and “$59,000.”55 $150,000 per work infringed. Finally, this section states that statutory damages may be reduced to not less than $200 for innocent infringement. Because of the discretion courts have in weighing the 5. See, e.g., Silberman v. Innovative Luggage, Inc., 2003 WL 1787123, *8 (S.D.N.Y. factors they examine in setting statutory damages, cases 2003) (“[A]s long as infringement commenced before the date of registration, involving similar infringing conduct may result in dif- statutory damages . . . are barred even if infringement continued after the date ferent awards.56 Ironically, when the same case is later of registration.”) (emphasis in original); Fournier v. Erickson, 202 F. Supp. 2d 290, 298 (S.D.N.Y. 2002) (“Each subsequent appearance [of plaintiff’s photo- retried, the award may be even greater, as evidenced graph after its registration] was part of the continuous, ongoing advertising by Capital Records, Inc. v. Thomas.57 Capital Records also campaign. Because the alleged infringement commenced before the effective highlights the debate that continues whether statutory date of his registration, Fournier is not entitled to statutory damages.”). damages should compensate or deter. 6. See Walt Disney Co. v. Powell, 897 F.2d 565, 569 (D.C. Cir. 1980) (“Both the text of the Copyright Act and its legislative history make clear that statutory In Capital Records, record companies sued the defen- damages are to be calculated according to the number of works infringed, not dant for making 24 songs in her Kazaa shared folder the number of infringements.”). available to others to download. In the first trial, the jury 7. See WB Music Corp. v. RTV Commc’n Group, Inc., 2004 WL 964247 (S.D.N.Y. assessed statutory damages of $9,250 per song for a total 2004), rev’d, 445 F.3d 538 (2d Cir. 2006) (awarding statutory damages based on the number of defendant-created compilations). of $220,000.58 The trial judge vacated the verdict finding it “wholly disproportionate to the damages suffered by 8. See supra note 3. Plaintiffs.”59 The court stated that, although the defen- 9. For instance, Princeton Univ. Press v. Mich. Document Servs., Inc., 855 F. Supp. 905 (E.D. Mich. 1994), rev’d en banc, 99 F.3d 1381, 1392 (6th Cir. 1996), dant “infringed . . . 24 songs – the equivalent of approxi- found defendant liable for willful infringement of six works and assessed it mately 3 CDs, costing less than $54, . . . the total damages $5,000 for each work for a total of $30,000. An en banc appellate court reversed awarded is more than five hundred times the cost of buy- the award as excessive finding no willfulness. ing 24 separate CDs and more than four thousand times 10. 17 U.S.C. § 412 (2) sets forth the exception, which applies to published works only. The exception permits an award of statutory damages for a post- 60 the cost of three CDs,” noting, infringement registration of a published work if the work is registered within [w]hile the Copyright Act was intended to permit three months of its first publication. statutory damages that are larger than the simple cost 11. See cases supra note 4; see also Johnson v. Univ. of Va., 606 F. Supp. 321, of the infringed works in order to make infringing a far 324–25 (W.D. Va. 1985) (“[T]he alleged post-registration infringements involve only photographs which were first used by defendants prior to registration. less attractive alternative than legitimately purchas- Consequently, those alleged post-registration infringements ‘commenced’ ing the songs, surely damages that are more than one prior to registration, and thus pursuant to § 412 they provide no basis for hundred times the cost of the works would serve as a allowing statutory damages.”). sufficient deterrent.61 12. See Dyer v. Napier, 2006 WL 680551, *3–4 (D. Ariz. Mar. 16, 2006). See also Troll Co. v. Uneeda Doll Co., 483 F.3d 150, 158 (2d Cir. 2007) (“[A] plaintiff may On remand, the jury increased the award to $80,000 not recover statutory damages and attorney’s fees for infringement occurring per song for a total of $1.92 million or more than eight after registration if that infringement is part of an ongoing series of infringing times the damages awarded in the first trial.62 The award acts and the first act occurred before registration.”). will likely spark a due process challenge because it is so 13. 967 F.2d 135 (5th Cir. 1992). Cases following Mason’s bright-line rule include Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 701 (9th Cir. 2008); far removed from any possible damage the plaintiff suf- Bouchat v. Bon-Ton Dep’t Stores, Inc., 506 F.3d 315, 330 (4th Cir. 2007); Qualey v. fered from the infringement. The award also highlights Caring Ctr. of Slidell, 942 F. Supp. 1074, 1076-77 (E.D. La. 1996). the difficulties parties face when attempting to estimate 14. 967 F.2d at 144. 63 statutory damages. 15. Id. at 143 (emphasis in original). With such potentially high stakes, understanding 16. Id. at 144. these limitations and uncertainties will assist all parties 17. 2004 U.S. Dist. LEXIS 26143, *71 (S.D.N.Y. Jan. 3, 2005). See also Whelan in prosecuting or defending a copyright case involving Assoc., Inc. v. Jaslow Dental Lab., Inc., 609 F. Supp. 1325, 1331 (E.D. Pa. 1985) statutory damages. ■ (holding that post-registration infringing software that was “different” because it contained “improvements” was found to be part of a “series of infringements” that began with the pre-registration software). 1. See Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d 455 (D. Md. 2004) (jury award of statutory damages of $19.7 million); Columbia Pictures 18. Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 7.16(C)(1) Television, Inc. v. Krypton Broadcasting, Inc., 259 F.3d 1186, 1189 (9th Cir. 2001) at 7-181 (2008). (statutory damages award of more than $31 million). 19. Sometimes courts make the same mistake. See Antenna Tel. v. Aegean Video, 2. 17 U.S.C. § 412(2) limits the availability of statutory damages. This section Inc., 1996 WL 298252, *11 (E.D.N.Y. 1996), (“Since the prevailing plaintiff is requires registration of the work before it is infringed or within three months entitled to a separate statutory damage award for each infringement commit- after its initial publication. 17 U.S.C. § 504(c)(1) provides for one grant of statu- ted by the Defendants, the court must determine the total number of infringe- tory damages where multiple infringers acting in concert infringe one work ments and their distribution between the parties.”).

NYSBA Journal | November/December 2009 | 33 20. 17 U.S.C. § 504(c)(1) (emphasis added). 44. See Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 288–89 (2d Cir.1999) (maxi- 21. H.R. Rep. No. 94-1476 at 162 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, mum statutory damages awarded where defendant “chose to ignore the 5778: “A single infringer of a single work is liable for a single amount . . . injunction [prohibiting continuing use of the infringing program]”; Nat’l no matter how many acts of infringement are involved in the action and Football League v. PrimeTime 24 Joint Venture, 131 F. Supp. 2d 458, 479 (S.D.N.Y. regardless of whether the acts were separate, isolated, or occurred in a related 2001) (Maximum statutory damages awarded where defendant continued its series.” conduct after district court granted summary judgment finding that conduct infringing). 22. Paul Goldstein, Goldstein on Copyright § 14.2.2.2 at 14:63 (2009). It makes no difference if a defendant infringes two separate rights of the copyright 45. Microsoft v. Gonzales, 2007 WL 2066363, *7 (D.N.J. July 13, 2007) (“Willfulness owner such as the right to reproduce and the right to distribute. The copyright may be inferred if a defendant continued infringing behavior after receiving owner is still entitled to one grant of statutory damage because only one work notice.”). has been infringed. Id. 46. Branch v. Ogilvy & Mather, Inc., 772 F. Supp. 1359, 1364 (S.D.N.Y. 1991); 23. See, e.g., Smith v. NBC Universal, 2008 WL 612696, *2 (S.D.N.Y. Feb. 28, Wenaha Music Co. v. Irish Wheel, Inc., 1994 WL 661028, *1 (W.D.N.Y. Nov. 16, 2008). 1994) (“[I]t does not follow that the defendants’ subsequent failure to cease the alleged infringing acts constitutes willfulness. . . . [D]efendants’ actions may 24. See Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d Cir. 1986) been carried out in reliance on advice of counsel.”). (“Consideration of these factors in setting the statutory damage award sometimes results – on account of their several and joint liability – in a less culpable 47. See Princeton Univ. Press v. Michigan Document Servs., Inc., 99 F.3d 1381, defendant being held liable in an amount greater than otherwise would be the 1392 (6th Cir. 1996) (“[W]e cannot say that the defendants’ belief that their case had it appeared in the action alone. This possibility is not a fatal obstacle. copying constituted fair use was so unreasonable as to bespeak willfulness.”); . . . [T]he relevant faults of the defendants are irrelevant.”). but see Basic Books, Inc. v. Kinko’s Graphics Corp., 758 F. Supp. 1522, 1530–33, 1544 (S.D.N.Y. 1991) (unsuccessful fair use defense did not negate willfulness). 25. Id. On remand in that case, the district court awarded statutory damages jointly and severally against two willful defendants even though one had vic- 48. 17 U.S.C. § 504(c)(1). timized the other. See 670 F. Supp. 1133 (S.D.N.Y. 1987), aff’d mem., 862 F.2d 304 49. See Superior Form Builders, Inc. v. Dan Chase Taxidermy Supply Co., 74 F.3d (2d Cir. 1988). 488, 496 (4th Cir. 1996); Read Corp. v. Portec, Inc., 970 F.2d 816, 826–27 (Fed. Cir. 26. The Act at 17 U.S.C. § 101 defines a compilation as “a work formed by the 1992), abrogated on other grounds, Markham v. Westview Inst., Inc., 52 F.3d 967 collection and assembling of preexisting materials or of data that are selected, (Fed. Cir. 1995); Fitzgerald Publ’g. v. Baylor, 807 F.2d at 1117; Getaped.Com, Inc. coordinated, or arranged in such a way that the resulting work as a whole v. Cangemi, 188 F. Supp. 2d 398, 403 (S.D.N.Y. 2002); Stevens v. Aeonian Press, constitutes an original work of authorship. The term ‘compilation’ includes Inc., 64 U.S.P.Q.2d 1920, 1923, 2002 WL 31387224, *3; Basic Books v. Kinko’s, 758 collective works.” That section also defines a collective work to include one F. Supp. at 1545; see also cases collected at Model Jury Instructions in Copyright, “in which a number of contributions, constituting separate and independent Trademark and Trade Dress Litigation (ABA 2008) at ¶ 1.7.8 at p. 85. works in themselves, are assembled into a collective whole.” 50. See Nintendo of Am., Inc. v. Dragon Pac. Int’l, 40 F.3d 1007, 1010 (9th Cir. 27. See WB Music Corp. v. RTV Commc’n Group, Inc., 445 F.3d 538, 540 (2d Cir. 1994) (“The district court has wide discretion in setting the amount of statutory 2006). damages under the Copyright Act.”). 28. See, e.g., Eastern Am. Trio Prods., Inc. v. Tang Elec. Corp., 97 F. Supp.2d 395, 51. RSO Records, Inc. v. Peri, 596 F. Supp. 849, 862 (S.D.N.Y. 1984). 419 (S.D.N.Y. 2000). 52. See, e.g., Broadcast Music, Inc. v. It’s Amore Corp., 2009 WL 1886038, *8 29. See, e.g., UMG Recordings, Inc. v. MP3.com, Inc., 109 F. Supp. 2d 223 (M.D. Pa. June 30, 2009) (“courts routinely compute statutory damages . . . (S.D.N.Y. 2000); Country Roads Music, Inc. v. MP3.com, 279 F. Supp. 2d 325 between two to six times the license fee defendants ‘saved’ by not obeying the (S.D.N.Y. 2003). Copyright Act”); see also EMI April Music, Inc. v. White, 618 F. Supp. 2d 497, 508 (E.D. Va. 2009) (“[C]ourts have routinely awarded statutory damages in 30. Xoom, Inc. v. Imageline, Inc., 323 F.3d 279 (4th Cir. 2003). amounts that arc between two and three times license fees”); Manno v. Tenn. 31. Stokes Seeds, Ltd. v. Park Seed Co., Inc., 783 F. Supp. 104, 107 (W.D.N.Y. Prod. Ctr., Inc., 2009 WL 2059897, *7 (S.D.N.Y. July 16, 2009) (“Case law reflects 1991). many instances in which courts have set [statutory damage] awards at several times the amount of lost profits.”). 32. 2003 WL 25841579 (S.D.Fla. Feb. 18, 2003). 53. 2000 WL 1262568, *5 (S.D.N.Y. Sept. 6, 2000). 33. WB Music, 445 F.3d at 540–41. 54. Id. *6. 34. Id. If a defendant were exposed to only one grant of statutory damages, defendant would have the perverse incentive to bundle an unlimited number 55. 302 F. Supp. 2d 455, 458, 464 (D. Md. 2004). of plaintiff’s separately copyrighted works together into one unauthorized 56. See Peer Int’l Corp. v. Pausa Records, Inc., 909 F.2d 1332 (9th Cir. 1990) (statu- compilation. tory damage award of $10,000); Peer Int’l Corp. v. Max Music & Entm’t, Inc., 35. 2004 WL 964247, *1 (S.D.N.Y. May 5, 2004). 2004 WL 1542253 (S.D.N.Y. 2004) (statutory damage award of $30,000); Peer Int’l Corp. v. Luna Records, Inc., 887 F. Supp. 560 (S.D.N.Y. 1995) (statutory dam- 36. 445 F.3d at 541. age award of $50,000). See also Samuelson & Wheatland, Statutory Damages in 37. Id. Copyright Law: A Remedy in Need of Reform, available at http://papers.ssrn.com/ 38. See, e.g., Branch v. Ogilvy & Mather, Inc., 772 F. Supp. 1359, 1364 (S.D.N.Y. sol3/papers.cfm?abstract_id=1375604 at pp. 30-31. 1991) (jury awarded plaintiff nominal damages of $1; plaintiff asked the court 57. 579 F. Supp. 2d 1210 (D. Minn. 2008). to award statutory damages and received an award of $10,000). 58. Id. at 1213. 39. Jordan v. Time, Inc., 111 F.3d 102, 104 (11th Cir. 1997); Twin Peaks Prods., Inc. 59. Id. at 1227. v. Publications Intl., 996 F.2d 1366, 1382 (2d Cir. 1993). 60. Id. 40. Id. 61. Id. 41. An innocent infringer is one who is not aware and has no reason to believe its acts constitute infringement. See Los Angeles News Serv. v. Reuters Television 62. See http://jolt.law.harvard.edu/digest/copyright/riaacapitol-v-thomas- Int’l Ltd., 149 F.3d 987, 995 (9th Cir. 1998); Eastern Am. v. Tang, 97 F. Supp. 2d rasset. at 419. A defendant is rarely able to establish innocence; and the presence of a 63. To date, two appellate courts have rejected due process challenges to statu- copyright notice on the work prevents a defendant from claiming innocence. tory damage awards. See Zomba Ents. Inc. v. Panorama Records, Inc., 491 F.3d 574, See 17 U.S.C. § 401(d); Matthew Bender & Co. v. West Pub. Co., 240 F.3d 116, 123 586–88 (6th Cir. 2007); Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d (2d Cir. 2001). 455, 459–60 (D. Md. 2004). 42. See Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 263 (2d Cir. 2005). 43. See supra note 9.

34 | November/December 2009 | NYSBA Journal Update: Did the Appellate Odds Change in 2008? Appellate Statistics in State and Federal Courts By Bentley Kassal

or many years I have been asked, as a former 5. The New York Court of Claims (a trial court). appellate judge, both by attorneys and clients, for Unless otherwise indicated, all the statistics herein are Fmy opinion as to their chances on appeal for their in percentages and presented in descending consecutive respective cases. Being unfamiliar with the specifics of order, with the most recent year, 2008 on the left. their case, in terms of the legal issues and evidence, my This is the third consecutive year I have intentionally response had to be clearly couched in generalities and omitted several appellate statistical dispositions that I carefully conditioned. Finally, eight years ago, I deter- have deemed to be irrelevant as well as distracting (sim- mined to provide as precise and verifiable an answer plicity and accuracy being the objective of this article). as possible, by resorting directly to official annual court Among those dispositions excluded are those which are reports, limited to those courts of particular interest to basically procedural and not on the merits, usually cat- New York State practitioners.1 The statistics presented egorized by the reporting appellate courts as “other” or are simple and accurate answers, based on court statistics “dismissed,” under “dispositions.” As for criminal cases, that are publicly available. the statistics included are only for New York State appel- The comments and appellate data herein are for the late courts, not federal. following appellate courts and include civil and, in some instances, criminal data for the year 2008: New York Court of Appeals4 1. New York Court of Appeals.2 The percentages for appellate statistics for the five-year 2. The Four Departments of the Appellate Division of period, ending 2008, are: the New York State Supreme Court.3 3. The Two Appellate Terms of the New York Civil Cases State Supreme Court for the First and Second 2008 2007 2006 2005 2004 Departments. 4. The U.S. Circuit Courts for the Second Circuit and Affi rmed 48 56 66 55 58 the District of Columbia. Reversed 43 27 25 35 37 Modifi ed 9 17 9 10 5 BENTLEY KASSAL ([email protected]) retired in 1993 as an Associate Justice of the Appellate Division, First Department; also served as a Judge in the Civil Court; a Justice of the Supreme Court, New York County; and Criminal Cases an Associate Judge at the New York Court of Appeals in 1985. He was a New York Assemblyman for six years. He received his law degree from 2008 2007 2006 2005 2004 Harvard Law School in 1940 and has been counsel to the litigation depart- Affi rmed 70 66 71 70 81 ment at Skadden, Arps, Slate, Meagher & Flom LLP since 1997. On June 6, 2009, in Normandy, Judge Kassal received the French Legion of Honor. This Reversed 7 30 17 25 15 is his seventh consecutive article on the subject of appellate statistics. Modifi ed 23 4 12 5 4

NYSBA Journal | November/December 2009 | 35 Comments 5. The total number of Appellate Division orders For civil cases, the affirmance rate decreased by 14% from granting leave were 54 (36 civil and 18 criminal) of 2007, which year was close to the norm for the years 2005 which the First Department granted 34 (24 civil and and 2004. On the other hand, the reversal rate of 43% was 10 criminal), which is 63% of the total of the four significantly higher than the previous two years. Departments. As to criminal cases, the affirmance rate of 70% was 6. As to the total motions filed, these decreased in 2008 about the same as the previous three years, but much to 1,421 or 4.05% less than the 2007 total of 1,481. lower than the 81% rate for 2004. Note, however, that 7. Dispositions – while the reversal rate also was much lower, the modifi- (a) In 2008, 225 appeals (172 civil and 53 crimi- cation rate greatly increased, to 23%. nal) were decided, compared to 185 (135 civil and 50 criminal) in 2007. Avenues to the Court of Appeals – (b) Of the 225 appeals for 2008, 186 had no dis- Jurisdictional Predicates sent. Civil Appeals for 2008 (c) Motions: 1,459 were decided in 2008 and (2007, 2006, 2005 and 2004 in parentheses) 1,440 in 2007. (d) The average time from return date of Dissents in Appellate Division 16 (16) (15) (12) (23) motions to disposition for all motions was 55 days, Permission of Court of Appeals 42 (39) (42) (50) (51) with 60 days for civil motions for leave to appeal. (e) Of the 1,093 motions decided for leave to Permission of Appellate Division 25 (21) (21) (20) (10) appeal in civil cases (the same as 2007), 6.8% were Constitutional Question 5 ( 6) ( 9) ( 6) ( 4) granted (7% in 2007). 8. Review of State Commission on Judicial Conduct determinations – three were reviewed in 2008, with Criminal Appeals for 2008 all confirming the sanction of removal. (2007, 2006, 2005 and 2004 in parentheses) 9. Rule 500.27 – Grants discretionary jurisdiction to the Court of Appeals to review certified questions Permission of Court of Appeals Judges 72 (76) (85) (85) (65) from certain federal courts and other state courts of Permission of Appellate Division Justices 28 (22) (15) (13) (29) last resort. At the end of 2007, two such cases were pending and, in 2008, both were answered. In 2008, Significant Other Statistics nine new cases certified by the United States Court 1. The average time from argument or submission to of Appeals for the Second Circuit were accepted, disposition of an appeal in normal course was 38 with two decided in 2008 and seven pending at the days and, for all appeals, 32 days. end of 2008. 2. The average time from filing a notice of appeal or an order granting leave to appeal to oral argument was about seven months, a month more than in 2007. The Four Departments of the Appellate Division of the Supreme Court of the 3. The average time from State of New York5 when all papers were served and filed to cal- Civil Statistics for 2008 endaring oral argument (2007, 2006, 2005 and 2004 in parentheses):6 was approximately First Second Third Fourth three months. Affi rmed 64 (60) (64) (66) (69) 62 (60) (59) (61) (62) 78 (78) (80) (81) (78) 65 (68) (70) (70) (70) 4. The 2008 filings con- sisted of 328 notices Reversed 20 (26) (23) (21) (21) 27 (27) (29) (27) (28) 11 (10) (10) (10) (11) 19 (15) (14) (13) (12) of appeal and orders Modifi ed 16 (14) (13) (13) (13) 11 (13) (12) (12) (10) 11 (12) (10) ( 9) (11) 16 (17) (16) (17) (18) granting leave, with the previous years being Criminal Statistics for 2008 340, 293, 284 and 296. (2007, 2006, 2005 and 2004 in parentheses): Of the 328 for 2008, 251 were for civil (com- First Second Third Fourth pared to 279 in 2007) Affi rmed 90 (88) (89) (88) (93) 89 (90) (88) (90) (90) 81 (84) (85) (87) (87) 84 (80) (80) (87) (89) and 77 for criminal Reversed 5 ( 6) ( 3) ( 3) ( 2) 6 ( 4) ( 5) ( 5) ( 6) 10 ( 6) ( 6) ( 7) ( 6) 6 ( 9) ( 9) ( 5) ( 3) (compared to 61 in 2007). Modifi ed 5 ( 6) ( 8) ( 9) ( 5) 5 ( 6) ( 7) ( 5) ( 4) 9 ( 6) ( 9) ( 6) ( 7) 10 (11) (11) ( 8) ( 8)

36 | November/December 2009 | NYSBA Journal Comments which also had a reversal rate of 30%, compared to the Affirmance Rates: For 2008, the civil affirmance rate for First’s 18%. the First Department increased by 6% over 2007 but was As to the total motions decided, the First had 1,509 as the same as 2006. The other three Departments remained against 3,432 for the Second, more than twice the amount approximately the same. for the First. Total Appellate Disposition: The First Department’s was 3,040; the Second’s was 17,403; the Third’s was 1,838; and U.S. Circuit Courts of Appeal for the Second Circuit the Fourth’s was 2,078. and the District of Columbia6 Total Oral Arguments: The First Department’s was This year, for the third time, appellate statistics for civil 1,253; the Second’s was 2,314; the Third’s was 713; and cases are being presented as they are specifically defined the Fourth’s was 933. in the official report, namely, as “Other U.S. Civil” Total Motions Decided: The First’s was 4,781; the and “Other Private Civil.” Additionally, administrative Second’s was 10,427; the Third’s was 6,062; and the appeals are being included for these two circuits. The Fourth’s was 4,245. Court of Appeals for the Federal Circuit is not included The Third’s Department’s much greater affirmance because it has nationwide jurisdiction to hear appeals rate of 78% for civil cases, relatively the same as the pre- in specific cases, such as those involving international vious four years, is accounted for by the much greater trade, government contracts, patents, trademarks and number of Article 78 Administrative Appeals from State veterans’ benefits. The statistics for 2006 and 2007 are in Administrative Agency cases, which are reviewed on the parentheses. more generous standard of “substantial evidence.” Second Administrative The Appellate Terms of the First and Circuit Appeals Second Departments Other Other U.S. Civil Private Civil Civil Statistics for 2008 Affi rmed 65 (63) (67) 64 (61) (71) Affirmed 18 (70) (70) (2007, 2006, 2005 and 2004 in parentheses): First Department Second Department Reversed 6 (10) ( 9) 7 (12) (11) Reversed 8 (10) (17) Affi rmed 62 (61) (65) (62) (73) 52 (61) (61) (52) (57) Dismissed 21 (26) (24) 21 (24) (18) Dismissed 11 (15) (13) Reversed 31 (29) (23) (25) (17) 37 (28) (27) (35) (34) Remanded 8 ( 1) ( 0) 8 ( 3) ( 0) Remanded 3 ( 5) ( 0) Modifi ed 7 (10) (12) (13) (10) 11 (11) (12) (13) ( 9) District of Administrative Criminal Statistics for 2008 Columbia Appeals (2007, 2006, 2005 and 2004 in parentheses): Other Other First Department Second Department U.S. Civil Private Civil Affi rmed 77 (83) (67) 79 (85) (71) Affirmed 65 (63) (70) Affi rmed 79 (86) (69) (72) (80) 62 (38) (64) (70) (57) Reversed 14 (12) ( 9) 17 ( 9) (11) Reversed 19 (20) (17) Reversed 18 (14) (29) (23) (16) 30 (59) (32) (25) (34) Dismissed 4 ( 2) (24) 1 ( 3) (18) Dismissed 13 (12) (13) Modifi ed 3 ( 0) ( 2) ( 5) ( 4) 8 ( 3) ( 4) ( 5) ( 9) Remanded 5 ( 3) ( 0) 3 ( 3) ( 0) Remanded 8 ( 5) (10) Comments The Second Department’s Appellate Term had total Comments dispositions of 1,426, more than three times the First In comparing civil appeals, both Circuit Courts have Department’s total of 448. In 2007, the Second’s total of greater affirmance rates than the New York Court of 1,504 was four times greater than the First Department’s Appeals and all four Appellate Division Departments, total of 370. However, as to 2008 total oral arguments, the with the District of Columbia Court being much higher. First had 308 as contrasted with Second’s total of 334. The U.S. Circuit Court for the Second Circuit’s affir- Regarding the affirmance rate for civil appeals, after mance rates are also slightly higher, on the average, than argument or disposition, the First’s rate was 62%, in con- both the First and Second Departments of the New York trast to the Second’s rate of 52%. Appellate Division. However, as to criminal appeals, the affirmance rate was 79% for the First in contrast to 63% for the Second,

NYSBA Journal | November/December 2009 | 37 New York Court of Claims 3. In essence, 5.3% of the 1,462 claims disposed of in This is a trial, not appellate, court solely concerned with 2008 resulted in 77 awards; 94.7% of the claims were claims against the state of New York. Because it is a dismissed. ■ unique tribunal, these 2008 statistics will have signifi- cance for practitioners in this arena. 1. For the New York state courts, the information may be obtained at the 1. A total of 1,462 claims were disposed of during this Web site http://www.nycourts.gov (“Courts,” “Court Administration” and “reports”). For the United States Circuit Courts, contact the Administrative period, an increase of 47 over 1,415 in 2007 and a Office of the United States Courts, One Columbus Circle N.E., Washington, decrease of 349 from 2006. There were 77 awards in D.C. 20544 or search its Web site, http://www.ca2.uscourts.gov. 2008, 89 in 2007 and 87 in 2006. 2. See the Annual Report of the Clerk of the Court of Appeals for 2008 avail- 2. The total dollar amount claimed in 2008 was able at http://www.nycourts.gov/ctapps/crtnews.htm. $142,438,223. The actual awards, however, totaled 3. See Reports of the New York State Office of Court Administration available at http://www.courts.state.ny.us/reports/annual/index.shtml. $36,042,246, an increase of $17,317,246, over the 4. See the Annual Report of the Clerk of the Court of Appeals for 2007 avail- $18,725,000 awarded in 2007. able at http://www.nycourts.gov/ctapps/crtnews.htm. 5. See Reports of the New York State Office of Court Administration available at http://www.courts.state.ny.us/reports/annual/index.shtml. 6. Applicable to the 12-month periods, ending September 30, 2008 and 2007. This year, for the second time, includes “Remanded.”

The Journal’s 2009 Statement of Ownership, Management and Circulation

10-01-09

38 | November/December 2009 | NYSBA Journal JOHN R. HIGGITT (jhiggitt@courts. state.ny.us) is the Chief Court Attorney of the Supreme Court, Appellate Term, First Department, a member of the Advisory Committee on Civil Practice to the Chief Administrative Judge of the Courts of the State of New York and an adjunct assistant professor of law at Benjamin N. Cardozo School of Law. The views expressed here are the author’s own. An abbreviated version of this article appeared in the New York Law Journal on May 14, 2009.

Which Actions “Affect” Real Property Under CPLR 6501? By John R. Higgitt

he notice of pendency, also known as the lis pen- or of the United States in which the judgment demanded dens, is a provisional remedy available to a plain- would affect the title to, or the possession, use or enjoy- Ttiff1 in certain actions concerning real property. The ment of, real property, except in a summary proceeding notice of pendency provides the world with constructive brought to recover the possession of real property.” notice of the plaintiff’s potential rights with respect to the The Court of Appeals’s principal decision on the issue real property identified in the notice.2 The purpose of the of which types of actions “affect” real property is 5303 notice is to preserve the court’s ability to award the plain- Realty Corp. v. O & Y Equity Corp. In that case, the plaintiff tiff relief with respect to that property.3 Thus, following reached an agreement with a corporation, the defendant the filing of the notice of pendency, those who “buy the O & Y Equity Corp., to purchase a tract of real property property or lend on the strength of it” are bound by all and an office building on it. The fee owner of the real proceedings in the action and the judgment.4 property was a limited partnership, the sole assets of Unlike the other provisional remedies – attachment, which were the property and the building, in which three injunction and receivership – the notice of pendency is partners, two limited and one general, held an interest. available without judicial intervention; a plaintiff need The general partner, which held a 97% interest in the only file it with the county clerk of the county in which partnership, was a corporation, defendant 41 Fifth Ave. the real property identified in the notice is situated.5 Realty Corp., that was wholly owned by O & Y Equity. The absence of pre-filing judicial review is all the more Pursuant to the agreement, the real property itself was significant as a plaintiff need not make any showing that not conveyed to the plaintiff. Rather, O & Y Equity would its action has merit to file the notice. However, post-filing sell to the plaintiff its shares in the general partner (41 judicial review is not only available but the courts have Fifth Ave. Realty Corp.) and arrange for the two limited demanded strict compliance with the requirements for partners to convey to the plaintiff their interests in the employing the notice of pendency. One of those require- realty-owning limited partnership. Thus, “the transaction ments is that the judgment sought by the plaintiff would was constructed in terms of a sale of stock.”8 The clos- “affect” real property.6 That requirement has been the ing never occurred and a $500,000 deposit placed by the subject of a lot of judicial attention, most recently in plaintiff into escrow was paid to the defendants. Homespring, LLC v. Lee,7 and is the focus of this article. The plaintiff commenced an action against the defendants, seeking specific performance of the agreement 5303 Realty Corp. v. O & Y Equity Corp. or, alternatively, damages. The plaintiff filed a notice of CPLR 6501 states, in pertinent part, that “[a] notice of pendency against the property, asserting that the action pendency may be filed in any action in a court of the state sought to enforce an agreement to sell the ownership in

NYSBA Journal | November/December 2009 | 39 the property; the defendants moved to cancel the notice. in realty. Rather, the interests of shareholders, members Supreme Court denied the motion, and the Appellate and partners in those entities are personal property.21 Division affirmed. Similarly, rights to shares in a cooperative apartment are The Court of Appeals reversed the order of the personal property, and actions to enforce those rights do Appellate Division and directed that the notice of pen- not affect real property.22 dency be cancelled. The Court noted the ease with which Not all actions, however, are easily classified. Braunston a plaintiff can “effectively retard the alienability of real v. Anchorage Woods, Inc.23 demonstrates the fine lines that property without any prior judicial review” by filing a sometimes must be drawn in distinguishing actions that notice of pendency, and sought to “counterbalance” the directly affect real property from those “that more or ability of a plaintiff to hinder a defendant’s interest in its less refer[] to real property.”24 In Braunston, the plaintiffs property. Thus, the Court afforded CPLR 6501 a narrow commenced an action against the owners and developers construction,9 observing that of property adjoining the plaintiffs’ lot, claiming that the [t]he usual object of filing a notice of lis pendens is to defendants diverted surface water from their land onto protect some right, title or interest claimed by a plain- the plaintiffs’ land and alleging that the diverted water tiff in the lands of a defendant which might be lost caused damage to their property. The plaintiffs sought under the recording acts in event of a transfer of the both an injunction compelling the defendants to elimi- subject property by the defendant to a purchaser for nate conduits that were used to deposit the water on the 10 value and without notice of the claim. plaintiffs’ property and damages, and they filed a notice of pendency against the defendants’ property. Rights to shares in a cooperative Rejecting the plaintiffs’ argument that the notice was available in the action because they sought a judgment apartment are personal property, that would limit the defendants’ use of their land, the and actions to enforce those rights Court of Appeals found that the action “concern[ed] simply some encroachment or wrong perpetrated by do not affect real property. defendants on plaintiffs’ land,” i.e., a claim to abate a nuisance.25 That claim, the Court held, was “actionable, The Court thus concluded that a plaintiff may file a notice not in order to determine a claim of title to real property[,] of pendency only when the action directly affects the but as a tort.”26 Critically, the plaintiffs were not claim- title to or possession of the defendant’s land; a “direct ing an interest in the defendants’ land. Rather, they were relationship” must exist between the action and the “merely seek[ing] to prevent defendants from commit- defendant’s real property.11 Because the plaintiff sought ting a wrongful act against plaintiffs.”27 In other words, specific performance of the agreement to sell the shares the damage caused to the plaintiffs’ property resulted in a corporation (41 Fifth Ave. Realty Corp.) and those from the defendants’ use of their land, but that did not shares represented only a beneficial ownership of realty, support the conclusion that the action to abate that use i.e., the plaintiff did not seek an interest in the land itself, directly affected the defendants’ real property. the Court found that the plaintiff’s action did not directly Actions for constructive trusts also can be difficult affect real property.12 to classify. An action for a constructive trust is available “[w]hen property has been acquired in such circumstances Specific Actions that the holder of the legal title may not in good conscience Certain actions clearly have a “direct relationship” with retain the beneficial interest.”28 When a constructive trust real property.13 These actions include: an action to fore- is imposed, the defendant must hold the property in trust close a mortgage or other lien secured by real property,14 for the benefit of the plaintiff and surrender the property an action for partition of a tract,15 an action for specific to the plaintiff under such terms as the court directs.29 A performance of a contract to convey land,16 an action notice of pendency may be filed in an action seeking a to quiet title to real property,17 and an action to enforce constructive trust where the plaintiff seeks to impose the rights to an easement over a defendant’s property.18 trust on the defendant’s real property.30 However, if the res Conversely, actions for damages do not affect real prop- of the putative trust is something other than real property, erty.19 Thus, where a vendee seeks to recover the down the notice of pendency is not available to aid the action.31 payment it made to the vendor on a contract for the sale Yonaty v. Glauber32 highlights the need to inspect of real property, the action does not directly affect real carefully the nature of the res of the putative trust. The property and a notice of pendency may not be filed in the plaintiff in Yonaty claimed that he and two individuals action.20 Actions by shareholders, members and partners entered into oral contracts pursuant to which the plaintiff seeking to vindicate their interests in corporations, limit- would assist the individuals in obtaining development ed liability companies and partnerships do not affect real rights to a building. He also claimed that, in return for property, regardless of whether the entities have interests his assistance, he would receive, among other things, a

40 | November/December 2009 | NYSBA Journal 20% interest in the limited liability company that held the requirement that the court scrutinize the factual allega- title to the land on which the building was sited. Alleging tions of the complaint, however, is a substantial one. that he performed the services required of him under the Merely asserting that the action will directly affect real contracts and that the two individuals (who were the sole property or demanding a judgment that would affect members of the LLC) failed to give him an interest in the real property does not place the action within the ambit LLC, the plaintiff commenced an action against the indi- of CPLR 6501. Rather, the court must look past the labels viduals and the LLC, seeking damages and the imposi- assigned to the causes of action and the content of the tion of a constructive trust on the property. In conjunction “wherefore” clause, and determine whether the facts set with the action, the plaintiff filed a notice of pendency out in the complaint demonstrate that the plaintiff has against the property. Supreme Court granted the defen- both asserted some interest in the real property itself and dants’ motion to cancel the notice of pendency on the sought relief that would directly affect the defendant’s ground that the action did not affect real property. interest in that property.38 The Third Department affirmed, finding that the plaintiff sought an interest in the LLC, not an ownership Homespring, LLC v. Lee interest in the real property itself. Citing 5303 Realty Corp., The Second Department’s recent decision in Homespring, the court noted the distinction between a corporation’s LLC v. Lee39 warrants discussion. In Homespring, the plain- interest in its assets and a shareholder’s interest in the tiff, a real estate broker, was retained by the managing corporation – the corporation itself owns its assets, such member of a limited liability company to procure certain as realty, and shareholders have an interest in the corpo- real property for the LLC. The agreement between the ration as a whole but no interest in any particular corpo- plaintiff and both the managing member and the LLC rate property.33 Because the plaintiff sought to enforce his stated that the LLC would pay the plaintiff a commis- rights to personal property (the interest in the LLC), he sion upon the purchase of that real property. Another could not file a notice of pendency in the action. company, Galaxy, allegedly controlled by the managing What then is the meaning of the directly-affects-real- member of the LLC, entered into a contract to purchase property requirement? The test for determining whether the property, listing the plaintiff as its broker. After the an action directly affects real property under CPLR 6501 closing occurred, Galaxy transferred the property to reduces to the following: Does the plaintiff assert some another entity, 38 Parsons. The managing member, the right, title or interest in the real property itself that could be LLC and Galaxy refused to pay the plaintiff his com- lost during the pendency of the action? And, does the plain- mission, and the plaintiff commenced an action against tiff seek relief in the action that, if granted, would diminish those parties and 38 Parsons for breach of the brokerage or extinguish the defendant’s interest in the real property? contract, filing a notice of pendency against the parcel. Supreme Court granted that portion of the defendants’ Scope of Court’s Inquiry motion that sought to cancel the notice of pendency. The To this point we have been concerned with the types of plaintiff appealed. actions that affect real property under CPLR 6501. But The Second Department affirmed, finding that because what is the scope of a court’s inquiry in determining the plaintiff was seeking to recover a broker’s commis- whether a particular action satisfies the directly-affects- sion – a claim for damages – the action did not affect real real-property test? Is a court limited to examining the property under CPLR 6501.40 While the plaintiff asserted allegations in a plaintiff’s complaint or can the court a cause of action to set aside the conveyance of the prop- consider evidence – affidavits, contracts, etc. – in making erty from Galaxy to 38 Parsons on the ground that it was that determination? fraudulent and designed to frustrate the plaintiff’s ability When a defendant moves to cancel a notice of pen- to enforce a judgment against the defendants, the court dency on the ground that the action does not affect real determined that the “gravamen” of the action was the property under CPLR 6501,34 “the court essentially is recovery of damages.41 The dissent would have reversed limited to reviewing the pleading to ascertain whether that portion of Supreme Court’s order cancelling the the action falls within the scope of CPLR 6501,” and “a notice of pendency and reinstated the notice.42 The dis- court is not to investigate the underlying transaction in sent asserted that because the plaintiff’s complaint con- determining whether a complaint comes within the scope tained a cause of action for fraudulent conveyance, which of CPLR 6501.”35 Thus, the court cannot consider mate- would vitiate the transfer of the property between Galaxy rial beyond the complaint and the plaintiff’s likelihood and 38 Parsons and place the property back in Galaxy’s of success on the merits of the action is irrelevant.36 A hands, the action directly affected real property.43 court is limited to scrutinizing the allegations of the com- The majority’s conclusion is consonant with the prin- plaint, and if at least one cause of action is asserted in the ciple that the action must directly affect real property. complaint that directly affects real property, the motion Although the plaintiff asserted a cause of action to set to cancel the notice of pendency should be denied.37 The aside a fraudulent conveyance, he asserted no right, title

NYSBA Journal | November/December 2009 | 41 17. Al’s Atlantic Inc. v. Shatma, LLC, 61 A.D.3d 787, 876 N.Y.S.2d 890 (2d Dep’t 44 or interest in the real property. Instead, the plaintiff 2009). sought to set aside the conveyance to place the property 18. Shapiro v. Ungar, 46 A.D.3d 1069, 847 N.Y.S.2d 705 (3d Dep’t 2007). back in the possession of Galaxy, the entity he alleged 19. Long Island City Sav. & Loan Ass’n v. Gottlieb, 90 A.D.2d 766, 455 N.Y.S.2d was liable for the commission. In other words, the plain- 300 (2d Dep’t 1982). tiff wanted to use the property as security for a possible 20. Rajic v. Sarokin, 214 A.D.2d 663, 625 N.Y.S.2d 94 (2d Dep’t 1995). money judgment against Galaxy. Therefore, no “direct 21. See 5303 Realty Corp. v. O & Y Equity Corp., 64 N.Y.2d 313, 318, 486 N.Y.S.2d relationship” existed between the action and the property. 877 (1984); McKernan v. Doniger, 161 A.D.2d 1159, 555 N.Y.S.2d 517 (4th Dep’t 1990); Gen. Prop. Corp. v. Diamond, 29 A.D.2d 173, 286 N.Y.S.2d 553 (1st Dep’t The majority’s conclusion is also consonant with the pur- 1968); see also N.Y. Limited Liability Company Law § 601. pose of the notice of pendency, which is to preserve the 22. Savasta v. Duffy, 257 A.D.2d 435, 683 N.Y.S.2d 511 (1st Dep’t 1999). court’s ability to award the plaintiff relief with respect to 23. 10 N.Y.2d 302, 222 N.Y.S.2d 316 (1961). that property45 not to provide security for a money judg- 24. 5303 Realty, 64 N.Y.2d at 321. ment. When pre-judgment security is sought for a money 25. Braunston, 10 N.Y.2d at 305. 26. Id. judgment, the plaintiff should consider whether an order 27. Id. 46 of attachment is available. The plaintiff may have been 28. Sharp v. Kosmalski, 40 N.Y.2d 119, 121, 386 N.Y.S.2d 72 (1976) (citing Beatty entitled to an order of attachment on the real property v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378 (1919)). under CPLR 6201(3), which permits a court to grant an 29. See Beatty, 225 N.Y. 380. order of attachment where the defendants – with the 30. See Nastasi v. Nastasi, 26 A.D.3d 32, 36, 805 N.Y.S.2d 585 (2d Dep’t 2005); Peterson v. Kelly, 173 A.D.2d 688, 570 N.Y.S.2d 592 (2d Dep’t 1991); see also Kasan intent to defraud their creditors or frustrate the enforce- v. Perlin, 24 Misc. 3d 1063, 877 N.Y.S.2d 851 (Sup. Ct., Nassau Co. 2009). ment of a judgment that might be rendered in the plain- 31. See Pizzurro v. Pasquino, 201 A.D.2d 635, 636, 607 N.Y.S.2d 975 (2d Dep’t tiff’s favor – have assigned, disposed of, encumbered or 1994). secreted property. 32. 40 A.D.3d 1193, 834 N.Y.S.2d 744 (3d Dep’t 2007). 33. Id. at 1195. Conclusion 34. CPLR 6514(a) provides the circumstances under which a court must cancel a notice of pendency. Although it is not listed in that subdivision as a ground for As Homespring demonstrates, the question of whether mandatory cancellation of the notice, where the plaintiff does not seek relief that a particular action directly affects real property is not would affect real property under CPLR 6501 the court must cancel the notice of always an easy one. A plaintiff who wishes to use the pendency (see Downs v. Yuen, 297 A.D.2d 251, 746 N.Y.S.2d 389 (1st Dep’t 2002); Siegel, N.Y. Practice § 336, at 537; see also 5303 Realty Corp. v. O & Y Equity Corp., notice of pendency must therefore take pains to draft a 64 N.Y.2d 313, 320–23, 486 N.Y.S.2d 877 (1984). With respect to the discretionary complaint that spells out the factual basis of a claim that grounds for canceling a notice of pendency, see CPLR 6514(b); see also 551 W. would support the filing of a notice of pendency. Absent Chelsea Partners LLC v. 556 Holding Corp., 40 A.D.3d 546, 838 N.Y.S.2d 24 (1st Dep’t 2007). such a claim, the plaintiff cannot avail itself of that pow- ■ 35. 5303 Realty, 64 N.Y.2d at 320–21. erful provisional remedy. 36. Nastasi, 26 A.D.3d at 36, 38. 37. See 83-17 Broadway Corp. v. Debcon Fin. Servs., Inc., 39 A.D.3d 583, 586, 855 1. This article will assume that the plaintiff is seeking to use the notice of pen- N.Y.S.2d 602 (2d Dep’t 2007); Moran v. Harting, 227 A.D.2d 391, 392 (2d Dep’t dency. However, any party, e.g., a counterclaiming defendant, may employ the 1996). notice of pendency. CPLR 6001; see Siegel, N.Y. Practice § 306, at 493 (4th ed). 38. See 5303 Realty, 64 N.Y.2d at 323; Yonaty v. Glauber, 40 A.D.3d 1193, 1194 (3d 2. See Civil Practice Law & Rules 6501; 5303 Realty Corp. v. O & Y Equity Corp., Dep’t 2007); Henrietta Piping, Inc. v. Antetomaso & Micca Group, LLC, 11 Misc 3d 64 N.Y.2d 313, 318, 486 N.Y.S.2d 877 (1984). 909, 913, 816 N.Y.S.2d 663 (Sup. Ct., Monroe Co. 2006). 3. See 5303 Realty Corp., 64 N.Y.2d at 321, n.5; Braunston v. Anchorage Woods, 39. 55 A.D.3d 541, 866 N.Y.S.2d 212 (2d Dep’t 2008). 10 N.Y.2d 302, 305, 222 N.Y.S.2d 315 (1961). 40. Id. at 542. 4. See Siegel, N.Y. Practice § 334, at 534; see also Letizia v. Flaherty, 207 A.D.2d 41. Id. The court also determined that the plaintiff could not file a notice of 567, 569, 615 N.Y.S.2d 487 (3d Dep’t 1994). pendency because the recovery of a broker’s commission is “regulated by 5. CPLR 6511(a). [N.Y.] Real Property Law § 294-b” and the plaintiff could not “circumvent 6. CPLR 6501. the restrictions imposed on real estate brokers to secure their compensation embodied in [that statute].” Id. However, as Professor Siegel has noted, Real 7. 55 A.D.3d 541, 866 N.Y.S.2d 212 (2d Dep’t 2008). Property Law § 294-b “does not . . . speak to a broker’s rights when litigation 8. 64 N.Y.2d at 316. over the [commission] ensues” (203 Siegel’s Practice Rev. at 2 (Nov. 2008)). More 9. Id. at 319–20. fundamentally, Real Property Law § 294-b appears to provide one mechanism pursuant to which a broker can, under certain circumstances, seek to obtain the 10. Id. at 322. commission; it is not the sole remedy of a broker who seeks a commission. See 11. Id. at 321–23. Real Property Law §§ 294-b(1) (broker “may file an affidavit” implementing 12. Id. the mechanism); 294-b(5)(j) (statute only applicable where contract for broker’s commission contains certain language); 294-b(5)(k) (mechanism provided by 13. The size or value of the plaintiff’s interest in the real property does not statute only available with respect to contracts involving certain types of real appear to be relevant in determining whether an action directly affects real property). property. See Jacobs v. Abramoff, 148 A.D.2d 497, 538 N.Y.S.2d 841 (2d Dep’t 1989) (3% interest in real property). 42. Homespring, 55 A.D.3d at 543. 43. Id. 14. Interboro Operating Corp. v. Commonwealth Sec. & Mortgage Corp., 269 N.Y. 56 (1935). 44. See 5303 Realty, 64 N.Y.2d at 322. 45. Id. at 321, n.5. 15. Siegel, N.Y. Practice § 334, at 534. 46. CPLR 6201; see Zodkevitch v. Feibush, 49 A.D.3d 424, 854 N.Y.S.2d 373 (1st 16. RKO Prop., Ltd. v. Boymel-green, 37 A.D.3d 580, 829 N.Y.S.2d 657 (2d Dep’t Dep’t 2008). 2007).

42 | November/December 2009 | NYSBA Journal TAX ALERT BY ROBERT E. HARRISON

ROBERT E. HARRISON ([email protected]) is a Partner at Eisner LLP, where he co-chairs the firm’s Tax Advisory Services group; he is a member of Eisner’s Executive Committee.

Extension of Increased Expensing Provisions

many businesses to purchase qualified The amount of the allowable property this year. deduction cannot exceed the aggre- The purchase of tangible person- gate amount of the taxpayer’s tax- al property and computer software able income that is derived from the (whether new or used) for use in the active conduct of any trade or busi- active conduct of a trade or business is ness. However, a carryover is available generally treated as a capital expendi- for the deduction disallowed because ture and the cost thereof is deductible of this taxable income limitation. over several years under the applica- Partnerships and S corporations can ble depreciation rules. Under Section elect to expense the cost of Section 179 he recently enacted American 179, however, an election is avail- property up to the applicable limita- Recovery and Reinvestment Tax able to treat the cost of such prop- tion, and the deduction passes through TAct of 2009 (the “Act”) extends erty placed in service during a year to their partners and shareholders as two provisions intended to encour- as a current expense. The maximum a separately stated item. The partners age the purchase of business prop- deduction that may be taken under and shareholders are also subject to erty with the hope of improving the this election for property placed in the applicable limitation. For example, current economic environment. These service during a year beginning in a profitable, two-person partnership provisions enable a business to obtain 2009 is $250,000. Unless changed can elect to expense $250,000 (in the larger tax deductions in the first year by future legislation, the maximum year 2009) of Section 179 property and qualified property is placed in ser- amount will drop to $125,000 (plus an pass a $125,000 deduction out to each vice. If the applicable tax rates remain inflation adjustment) in 2010 and to partner. Assuming one of the partners the same over an asset’s depreciable $25,000 thereafter. is not subject to other limitations (e.g., life, these provisions accelerate the tax In the case of a sports utility vehicle, basis, at-risk, passive loss rules) and has benefits of depreciation deductions the Section 179 deduction is limited a $150,000 Section 179 deduction from for the cost of business property. If tax to $25,000. A sports utility vehicle is another source, he or she would be lim- rates increase, the present value of the a four-wheeled vehicle with a gross ited to a $250,000 Section 179 deduction benefits of the accelerated deductions vehicle weight over 6,000 pounds but for the year 2009. The $25,000 excess may decrease, and vice versa. not over 18,000 pounds. amount would be lost as a deduction. The above annual dollar limitation If a partnership or an S corporation has Section 179 Expensing is reduced by the amount by which a loss for a taxable year, the Section 179 An increased dollar limitation the cost of Section 179 property placed deduction cannot be passed out to its ($250,000, see below) on the amount of in service during the year exceeds partners or shareholders. tangible personal property and off-the- $800,000. Thus, if $1,050,000 worth of Married persons filing a joint return shelf computer software that can be such property is placed in service in are limited to a $250,000 aggregate taken as a current tax deduction under the year 2009, no Section 179 deduc- Section 179 deduction. Married per- Internal Revenue Code § 179 (“Section tion would be available. As a result, in sons filing separate returns are treated 179”) was in effect for property placed some cases it would be advantageous as one taxpayer, so they must split in service in a tax year beginning in to delay putting tangible personal the $250,000 limitation equally. The 2008. The Act makes the increased property into service until the begin- component members of a controlled limits available for qualified property ning of the next taxable year in order group of corporations must appor- placed in service in tax years begin- to maximize the available Section 179 tion the $250,000 limitation among the ning in 2009. This should encourage deductions. members. For this purpose, where a

NYSBA Journal | November/December 2009 | 43 corporation owns more than 50% of machinery and equipment and tion for purposes of computing regu- another corporation, the corporations furniture and fixtures; lar depreciation reduces the benefit will be considered component mem- • “Qualified leasehold improvement of the bonus depreciation in the first bers of a controlled group (instead of property,” which is an improve- year. Assume property with a cost of the usual 80%). ment to the interior portion of non- $100,000 is placed in service and would Noncorporate lessors are not eligible residential real property made by be eligible for 20% depreciation the first to elect to expense the cost of Section 179 a lessee (or sublessee) or lessor of year, or $20,000. With the bonus depre- property unless the property subject to such portion, where the portion is ciation the first year’s depreciation is the lease has been manufactured or pro- occupied exclusively by the lessee $60,000 ($50,000 plus 20% of $50,000). duced by the lessor or certain activity (or sublessee) and the improve- Thus, the bonus depreciation gener- tests are satisfied. Estates and trusts are ment is placed in service more than ated another $40,000 (40%) of deprecia- not entitled to a Section 179 deduction. three years after the date the build- tion deductions in the first year. Another benefit for qualified property relates to the alternative minimum tax The basis of property for which a Section 179 computation. The bonus depreciation election is made is reduced by the amount of deduction and the Section 179 expensing amount are also deductible for purposes the Section 179 expense deduction. of the alternative minimum tax (they are not considered adjustments or pref- If a taxpayer’s Section 179 property ing was first placed in service. The erences). In addition, the depreciation is not used predominantly in a trade or term does not include the enlarge- deductions available for the remaining business at any time before the end of ment of a building, an elevator or basis of qualified property over its life the property’s applicable depreciation escalator, any structural improve- are also fully deductible for purposes of recovery period, the taxpayer must ment benefiting a common area, or the alternative minimum tax. recapture any benefit derived from the internal structural framework A word of caution: it is possible to the current expense deduction. This of a building; elect out of first year bonus deprecia- recapture is accomplished by includ- • Computer software, which is not tion in order to take more depreciation ing in taxable income the excess of the amortizable over 15 years as a deductions in later years. If such an amount expensed over the deprecia- “Section 197 intangible”; and election is made, however, the depre- tion deductions that would have been • Water utility property. ciation deductions will become sub- allowable through the year in which Qualified property also includes: ject to the normal rules for alternative the property ceased to be used pre- (1) property with class life of 20 years minimum tax adjustments. dominantly in a trade or business. or more and either (a) an estimated The basis of property for which production period exceeding two years Monetization of Costs a Section 179 election is made is or (b) an estimated production period The Act also extends a provision allow- reduced by the amount of the Section exceeding one year and a cost exceeding a corporation to monetize alter- 179 expense deduction. The remaining ing $1 million; (2) transportation prop- native minimum tax (AMT) credits basis is depreciable under the normal erty; and (3) certain aircraft. Qualified and research and development (R&D) rules, including eligibility for bonus property does not include any prop- credits, in lieu of 50% bonus depre- depreciation. erty financed with tax-exempt bonds. ciation and accelerated depreciation, The following example illustrates the if such credits arose in taxable years 50% Bonus Depreciation benefits of the new provisions: beginning before January 1, 2006. This The Act also extends a provision for an Assume a business owner leasing a provision applies to qualified property additional first year (“bonus”) depre- portion of a building makes improve- placed in service from April 1, 2008 ciation of 50% of the adjusted basis of ments to the interior portion of the through December 31, 2009 (or during qualifying property (which cannot be building and acquires new machin- 2010 for certain long-lived property). used property) purchased and placed in ery and equipment, all of which is This alternative could be attractive to service during 2009. (For certain trans- placed in service in June 2009. The corporations with operating losses for portation property, aircraft and property leasehold improvements cost $400,000 which larger depreciation deductions with a longer production period, the and the machinery and equipment cost would give no immediate relief. date is extended through 2010.) Property $300,000. The first year tax benefit is It allows corporations to elect to eligible for the 50% bonus depreciation $168,974 (see sidebar, page 45). receive a refund equal to the lowest (“qualified property”) includes: The requirement that the adjusted of (1) 20% of the amount of the excess • Property with a recovery period basis of qualified property be reduced of the available write-offs for bonus of 20 years or less, such as by the amount of the bonus deprecia- depreciation and accelerated depre-

44 | November/December 2009 | NYSBA Journal First Year Tax Benefit ciation over the amount that would Expensing allowance (Section 179 expense): otherwise be allowable; (2) 6% of the Machinery and equipment $250,000 pre-2006 unused AMT and R&D cred- Bonus depreciation: its; or (3) $30 million. Leasehold improvements: 50% x $400,000 200,000 For example, assume that during Machinery & equipment: 50% x $50,000 2009 a taxpayer places in service quali- (net of Section 179 expense) 25,000 fied property with a cost of $10 million with a five-year recovery period. Normal depreciation on the balance of expenditures: Without regard to bonus depreciation, Leasehold improvements: 1.391% times $200,000 2,782 under the Modified Accelerated Cost Machinery & equipment: 20% times $25,000 5,000 Recovery System (MACRS), first year Total depreciation deduction $482,782 depreciation would be $2 million. With Federal tax savings (at 35%) $168,974 bonus depreciation the first year depreciation would be $6 million (50% of $10,000,000 + 20% of $5,000,000). Thus, • The Section 179 deduction is One of the provisions in that bill the excess referred to in (1) above is $4 treated as a depreciation deduc- would increase the $250,000 Section million and $800,000 (20%) would be tion for purposes of the limitation 179 expensing amount to $500,000 and the refundable credit amount, assum- on deductions for luxury auto- provide for a phased reduction when ing the corporation had $13,333,333 of mobiles and other listed prop- the cost of Section 179 property placed unused pre-2006 AMT and R&D cred- erty (e.g., computers and cellular in service during a year exceeds $2 its (6% of $13,333,333 is $800,000). phones). million. The increased limits would • For passenger automobiles placed be made permanent under this bill. Additional Points in service in 2009 and used 100% In the present political and financial Other points to remember about these for business, the maximum oth- situations, it is not possible to predict provisions: erwise allowable first year depre- whether this proposal or any other • Whether the Act has an impact ciation deduction is increased to change in the Section 179 expensing on state and local taxes depends $10,960 (from $2,960). However, amount will be enacted. on whether the state conforms to this increase does not apply if an It is anticipated that these accelerat- federal tax law or has decoupled election out of bonus depreciation ed tax benefits will help the economy from it. Depending on each state’s is made. by reducing 2009 taxes imposed on law, additional state tax benefits • Special rules expand the 50% corporations, self-employed persons, may be available. bonus depreciation to “qualified and shareholders, partners, and mem- • A cost segregation study for a real disaster assistance property” and bers of entities engaged in a trade estate project may identify costs “qualified cellulosic biofuel plant or business. Various industries that eligible for the new benefits. property.” produce property eligible for these • It is possible to elect out of bonus On June 30, 2009, Senator Chuck benefits should also see a stronger depreciation and/or not to elect Grassley (R-Iowa) introduced the demand for their products. ■ Section 179 expensing. Small Business Tax Relief Act of 2009.

NEW YORK STATE BAR ASSOCIATION Annual Meeting location has been moved— Hilton New York 1335 Avenue of the Americas New York City January 25-30, 2010

NYSBA Journal | November/December 2009 | 45 PRESENTATION SKILLS FOR LAWYERS BY ELLIOTT WILCOX

ELLIOTT WILCOX is a professional speaker and a member of the National Speakers Association. He has served as the lead trial attorney in over 140 jury trials, and teaches trial advocacy skills to hundreds of trial lawyers each year. He also publishes Trial Tips, the weekly trial advocacy tips newsletter .

Conquer Your Fear of Speaking in Public

wo months ago, when you agreed to fail? Or did you want the speaker to Talk to Only One Person in the to speak, you thought it would be a be entertaining, mesmerizing, educa- Audience Tgreat opportunity to market your- tional, witty, charming, and at the top Do you feel comfortable speaking to self and meet potential clients. But now, of their game? one person? Could you present your standing offstage as they introduce you, Your audience feels the same way. speech to one person? Would you get your mouth goes dry, your palms sweat, You were invited to speak because flustered or forget your speech if there and your knees are trembling. The feeling they want you to share something was only one person in the audience? of anxiety increases, and you ask yourself, of value with them. They want to No? Then what difference should it “Why did I agree to do this?” learn something, to be entertained, make if they’re surrounded by hun- to grow, to feel better, safer, or dreds or thousands of people? Afraid to Speak in Public? smarter. They want you to succeed. Start by picking out someone in the You’re not alone. The Book of Lists ranks Even in enemy territory, they don’t front, making eye contact, and having “Speaking Before a Group” as the worst want your speech to fail. Imagine a one-on-one conversation. If you only human fear. It shouldn’t be that way. a Florida Gator fan listening to a talk to one person the entire speech, Unless you’re saying some final words speech by Bobby Bowden or a die- they’d feel uncomfortable, the rest of before your execution, you don’t have hard Democrat listening to George the audience would feel neglected, much to fear about public speaking. Bush. Despite the inherent hostility, and your speech would be ineffective. I’ve listened to thousands of speeches, they probably still want to be enter- To avoid that, talk with them for only including hundreds of first timers, and tained, inspired, or educated. If you a moment, then pick someone in the I’ve never seen a speaker pass out, were stuck in the seat for the full back left corner, and talk to them for a burst into flames, or die of fright. So hour anyway, wouldn’t you rather little while. Then shift to the front left why do people get nervous, even terri- see a speaker succeed? Remember, or the back right corner, continuing fied, when asked to speak? even if they disagree with your message, to work your way around the room, When you conquer your fear of the audience still wants you to succeed. always making eye contact with just public speaking, you will enjoy three one person, having a one-on-one con- benefits. First, you will increase your Be a Boy Scout versation, and then moving on. credibility, because people will presume The Boy Scouts have a simple motto: This technique has two benefits. you’re an expert. Second, you’ll mar- “Be Prepared.” If you’ll follow that First, you won’t feel overwhelmed ket yourself and increase exposure for advice, you can eliminate the most by the size of the audience, because yourself, your firm, or your message. common cause of a speaker’s ner- you’re only talking to one person at Finally, you’ll enjoy the adrenaline rush vousness. Many speakers get nervous a time. Second, everyone in the room and personal satisfaction that comes because they’re not confident about will get the impression you’re talking from knowing your words made a dif- what they’re going to say. Investing directly to them. They’ll feel a conference in someone’s life. Here are a few extra time in your preparation yields nection between themselves and the tips for controlling your nervousness a tremendous payoff. Spend extra time speaker. When they feel that connec- the next time you speak to a group. to practice your speech, anticipate tion, they listen more attentively, and possible questions or objections, and retain more of your message. The Audience Is Not Your Enemy know who you’re speaking to. When Remember, they want you to suc- The audience wants you to succeed. you feel confident about your mate- ceed. Many members of the audience Think back to the last time you were an rial, you’ll stop worrying about what will even envy your courage. Speak to audience member. When the speaker you’re going to say and can focus on your new friends in the audience, and first took the stage, did you want them how you’ll help your audience. you’ll conquer your fear of speaking. ■

46 | November/December 2009 | NYSBA Journal NEW YORK STATE BAR ASSOCIATION

From the NYSBA Book Store > COMING SOON! Best Practices in Legal Management A Comprehensive Guide

The most complete and exhaustive treatment of the subject of the business aspects of running a law firm available anywhere. Approximately 90 law practice management experts were asked to submit what they considered best practices for managing all “back-office” functions of a law firm.

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PRODUCT INFO AND PRICES ”This book is a gold mine of information. Not only does it include 2010 / over 200 pp., softbound clear descriptions of best practices for managing a law firm, it incor- PN: 4131 porates ready-to-use forms managing partners and firm administra- NYSBA Members $139 tors can download and use. It is thorough in its coverage, full of Non-members $179 useful information, easy to understand and interesting to read. It may ** Free shipping and handling within the conti- be the last practice management book you will ever need to buy.” nental U.S. The cost for shipping and handling outside the continental U.S. will be added to your Gary Munneke, Esq. order. Prices do not include applicable sales tax. Chair, Committee on Law Practice Management, NYSBA Professor, Pace University Law School Get the Information Edge 1.800.582.2452 www.nysba.org/pubs Mention Code: PUB0608 INDEX TO ARTICLES 2009

This index places each article in one of the following categories. All articles are available online, to members. The articles are listed, alphabetically, by title, followed by the last name(s) and first initial(s) of the author(s); the issue date; and the page number. A word-searchable index to the Journal, for years 2000–2009, is available online at www.nysba.org. Click on “publications,” then Bar Journal. Scroll down, and on the right-hand side click on “Searchable Index by Category (2000-present).”

Administrative Law Consumer Law International Law Animal Law Courts Labor and Employment Antitrust Law Criminal Law Law Practice Appeals Crossword Legal Writing Arbitration / Alternative Dispute Elder Law Poetry Resolution Environmental Law Point of View Column Attorney Professionalism Evidence Real Property Law Banking / Finance Law Family Law Technology and the Law Bankruptcy Government and the Law Tax Law Books on Law Health Law Torts and Negligence Civil Procedure History Trial Practice Commercial Law Humor – Res Ipsa Jocatur Trusts and Estates Constitutional Law Intellectual Property Women in Law

Appeals Burden of Proof – “Buried, But Not Dead,” Update: Did the Appellate Odds Change in 2008? Appellate Statistics in Horowitz, D., Oct. 2009, p. 18 State and Federal Courts, Kassal, B., Nov./Dec. 2009, p. 35 Burden of Proof – From the Fryeing Pan, Horowitz, D., June 2009, p. 20 Arbitration / Alternative Dispute Resolution Burden of Proof – How About Some Courtesy?, Arbitrating Commercial Issues: Do You Really Know the Out-of-Pocket Horowitz, D., Feb. 2009, p. 16 Costs?, Offenkrantz, R., Jul./Aug. 2009, p. 30 Burden of Proof – It’s the Note of Issue, Stupid, Arbitration: Counsel, Beware, Marrow, P., Oct. 2009, p. 36 Horowitz, D., May 2009, p. 16 Why Arbitrate? The Benefits and Savings, Sussman, E., Oct. 2009, p. 20 Burden of Proof – Not[e] Bene, Horowitz, D., Sept. 2009, p. 14 Attorney Professionalism Burden of Proof – “Pleeeease Talk to Me,” Attorney Web Sites: Ethical Issues Are Only the Beginning: Non- Horowitz, D., Jul./Aug. 2009, p. 20 Traditional Attorney Advertising on the Internet, Burden of Proof – “To Be Continued . . .,” Bialek, A.; Gunther P.; Smedresman, S., June 2009, p. 10 Horowitz, D., Nov./Dec. 2009, p. 21 Forum, Attorney Professionalism Committee, Jan.–Oct. 2009 Burden of Proof – What About the CPLR?, In With the Rules, Out With the Code, Krane S.; Horowitz, D., Jan. 2009, p. 20 Lewis, D., June 2009, p. 24 Plaintiff Expert Reports: An Insider Revisits Disney, It’s No Joking Matter: Our Profession Requires Civility and Respect, Grace, H.S., Jr. Jul./Aug. 2009, p. 24 Fox, M.D.; Fox, M.L., Feb. 2009, p. 10 Family Law New Model Rules of Professional Conduct Effective Drafting Matrimonial “Cohabitation” Clauses After Graev, April 1, 2009, May 2009, p. 9 Rosenberg, L., June 2009, p. 30 Putting the “Civil” Back in Civil Litigation, Lerner J., Mar./Apr. 2009, p. 33 History Caines Identities, The: The Faces of America’s First Official Reporter, Commercial Law Spivey, G., Jul./Aug. 2009, p. 10 Legal Implications of the Assignment of a Construction Contract, In Memoriam: Lorraine Power Tharp and Bennett, S., Nov./Dec. 2009, p. 25 David S. Williams, Jan. 2009, p. 7 More Than Bargained For? Topics of Consideration in the Issuance and Law Day 2009: “A Legacy of Liberty – Celebrating Lincoln’s Acceptance of Delaware LLC Opinions, Gottesman, B.; Bicentennial,” June 2009, 36 Swenson, S., Feb. 2009, p. 20 Past as Present, The: The Last “Dead Heat” in the State Senate, 100 Years Protecting Minority Shareholders in Close Corporation Valuation Ago, Liebman, B., Jan. 2009, p. 33 Proceedings, Moar, D., May 2009, p. 24 “Tammany Hall Had a Right to Expect Proper Consideration”: Criminal Law The Judicial Nominations Controversy of 1898, Eyewitness Conundrum, The: How Courts, Police and Attorneys Can Manz, W., Mar./Apr. 2009, p. 10 Reduce Mistakes by Eyewitnesses, Gershman, B., Jan. 2009, p. 24 Intellectual Property Is the District Attorney a Permissible Guest at a “Pringle Hearing”?, Statutory Damages in Copyright Litigation, Castiglione, J., May 2009, p. 20 Berger, A., Nov./Dec. 2009, p. 30 New Criminal Law and Procedure Legislation, Kamins, B., Feb. 2009, p. 28 Labor and Employment Legal Requirements That Influence Control of Independent Contractors Environmental Law and Employees, Wood, R., Feb. 2009, p. 36 Environmental Law: Safeguarding “An Invaluable and Irreplaceable New York City Civil Rights Restoration Act Grows Teeth, The, Hamid, J.; Resource” – The Genesis of New York’s Wetlands, Hogan, M., Jul./Aug. 2009, p. 34 Weinberg, P., Jul./Aug. 2009, p. 46 Law Practice Evidence Conquer Your Fear of Speaking in Public, Burden of Proof – Brill, Baby, Brill, Wilcox, E., Nov./Dec. 2009, p. 46 Horowitz, D., Mar./Apr. 2009, p. 24

48 | November/December 2009 | NYSBA Journal Finding the Silver Lining: The Recession and the Legal Employment New Criminal Tax Laws – Taking Aim at Tax Evaders, Market, Littman, R., Sept. 2009, p. 16 Comiskey, W., Nov./Dec. 2009, p. 10 Identifying and Managing the Increased Risks Law Firms Face in a Ways to Steer Clear of IRS Tax Disputes, Wood, R., June 2009, p. 33 Recession, Davis, A.; Elkanich, D., Sept. 2009, p. 28 Technology and the Law Keeping Your Practice Afloat – Legal Marketing in Turbulent Times, Nelson, S.; Simek, J., Sept. 2009, p. 33 Computers & the Law – Implications of a “Keep It All” Data World, Bennett, S., Feb. 2009, p. 42 Law Practice Management: Everything You Need to Know (About Practicing Law) . . . You Learned in Law School, Computers & the Law: Protecting Trademarks in the Global Marketplace, Munneke, G., May 2009, p. 32 Miranda, D., June 2009, p. 50 Law Practice Management: Recessionary Road, E-Discovery: Do Ask; Do Tell: Keyword Search Terms, Bennett, S., Munneke, G., Jul./Aug. 2009, p. 43 Oct. 2009, p. 44 Law Practice Management: Unexpected Career Transitions, Look Who’s Talking: Legal Implications of Twitter Social Networking Munneke, G.; Pagnotta, D., Feb. 2009, p. 44 Technology, Bennett, S., May 2009 p. 10 Legal Research: Researching Administrative Decisions, Declaratory Modernized, Streamlined Contract, The: Electronic Contracts and Rulings and Advisory Opinions, Manz, W., Jan. 2009, p. 44 Signatures – Redux, Noonan, B., Oct. 2009, p. 10 Legal Research: Researching Superseded New York Statutes, Torts and Negligence Manz, W., June 2009, p. 46 2008 Insurance Law Update: Uninsured, Underinsured and Managing to Survive: Boosting the Bottom Line in Tough Times, Supplementary Uninsured Motorist Law – Part I, Greene, A., Sept. 2009, p. 23 Dachs, J., May 2009, p. 41 Maybe Mom and Dad Were Right: Musings on the Economic Downturn, 2008 Insurance Law Update: Uninsured, Underinsured and Munneke, G., Sept. 2009, p. 10 Supplementary Uninsured Motorist Law – Part II, Presentation Skills for Lawyers: Presentation Lessons From 35,000 Feet, Dachs, J., June 2009, p. 37 Wilcox, E., May 2009, p. 46 Accidents Abroad and Inconvenient Forums, Presentation Skills for Lawyers: Winning at Trial With a Dynamic Dickerson, T., Mar./Apr. 2009, p. 27 PowerPoint Presentation, Lane, R.; Olson, B., Oct. 2009, p. 40 Are Cigarettes Defective in Design? California and New York Diverge in Struggles of Lawyer-Leaders and What They Need to Know, The, Approach and Result, Knaier, R., Jan. 2009, p. 10 Smith R., Mar./Apr. 2009, p. 38 City Sidewalk Trees and the Law, Kaye, J.; Polechronis, R.; Reddy, A.; Rebold, J., Feb. 2009, p. 24 Legal Writing Medicare Secondary Payer Statute, The: Medicare’s Recovery Rights Language Tips, Block, G., Jan.–Nov./Dec. 2009 in the Context of Liability Insurance (Including Self-Insurance) and The Legal Writer: Document Design: Pretty in Print — No-Fault Insurance, Trusiak, R., Jan. 2009, p. 39 Part I, Lebovits, G., Mar./Apr. 2009, p. 64 The Legal Writer: Document Design: Pretty in Print — Trusts and Estates Part II, Lebovits, G., May 2009, p. 64 Changes for Powers of Attorney in New York, Bailly, R.; The Legal Writer: E-Mail Netiquette for Lawyers, Hancock, B., Mar./Apr. 2009, p. 41 Lebovits, G., Nov./Dec. 2009, p. 64 Planning Ahead – Cutting Family Ties: The Inheritance Rights of The Legal Writer: Nuts ’n’ Bolts: Legal-Writing Mechanics — Adopted-Out Children, Penzer, E.; Harper, R., Feb. 2009, p. 50 Part I, Lebovits, G., June 2009, p. 64 Planning Ahead – Exoneration Clauses – Not All They’re Cracked Up to The Legal Writer: Nuts ’n’ Bolts: Legal-Writing Mechanics — Be, Cooper, I.; Harper, R., Oct. 2009, p. 26 Part II, Lebovits, G., Jul./Aug. 2009, p. 64 The Legal Writer: Persuading the Judge Through Writing: How to Win, Lebovits, G., Feb. 2009, p. 64 The Legal Writer: Prove Proof It With Revision Re-Vision — Part I, MOVING? let us know. Lebovits, G., Sept. 2009, p. 64 The Legal Writer: Prove Proof It With Revision Re-Vision — Part II, Notify OCA and NYSBA of any changes to your address or Lebovits, G., Oct. 2009, p. 64 other record information as soon as possible! The Legal Writer: Writing Carefully, Misused Modifiers Must Be Avoided, Lebovits, G., Jan. 2009, p. 64 OCA Attorney Registration Point of View PO BOX 2806 Employee Free Choice Act, The – What’s an Employer to Do?, Klein, E.; Church Street Station Kasten, B.; Varon, J., Sept. 2009, p. 38 New York, New York 10008 Is the Cure Worse Than the Disease? The Direct-to-Consumer Advertising Exception, Kay, B., Oct. 2009, p. 30 TEL 212.428.2800 No Recovery of Tax Overpayment in Tax Malpractice Action in New York, FAX 212.428.2804 Todres, J., May 2009, p. 36 Email [email protected] Should False Imprisonment Damages Be Taxable?, Wood, R., Jul./Aug. 2009, p. 38 Real Property Law New York State Bar Association Metes & Bounds – New Legislation Requires Property Owners to Disclose MIS Department Air Contamination Reports, Schnapf L.; Stein, J., Feb. 2009, p. 47 One Elk Street Which Actions “Affect” Real Property Under CPLR 6501?, Albany, NY 12207 Higgitt, J., Nov./Dec. 2009, p. 39 TEL 518.463.3200 Tax Law FAX 518.487.5579 Extension of Increased Expensing Provisions, Email [email protected] Harrison, R., Nov./Dec. 2009, p. 43

NYSBA Journal | November/December 2009 | 49 INDEX TO AUTHORS 2009

The following index lists the authors of all articles that have appeared in the Journal since the January 2009 edition. Below each author’s name is the general classification category used for the article. The headline describing the content of the article appears under that classification category in the Index to Articles that begins on page 48.

Bailly, Rose Mary, Higgitt, John R., Offenkrantz, Ronald J. Trusts & Estates Mar./Apr. 2009, p. 41 Real Property Nov./Dec. 2009, p. 39 Arbitration / ADR Jul./Aug. 2009 30 Bennett, Steven C., Hogan, Mary Beth, Olson, Bruce A., Commercial Law Nov./Dec. 2009, p. 25 Labor & Employment Law Jul./Aug. 2009, Law Practice Oct. 2009, p. 40 Technology & the Law Feb. 2009, p. 42 p. 34 Pagnotta, Deb Volberg, Technology & the Law May 2009 p. 10 Horowitz, David Paul, Law Practice Feb. 2009, p. 44 Technology & the Law Oct. 2009, p. 44 Evidence Jan.–Nov./Dec. 2009 Penzer, Eric W., Berger, Andrew, Kamins, Barry, Trusts & Estates Feb. 2009, p. 50 Intellectual Property Nov./Dec. 2009, p. 30 Criminal Law Feb. 2009, p. 28 Polechronis, Ralia, Bialek, Adam R., Kassal, Bentley, Torts & Negligence Feb. 2009, p. 24 Attorney Professionalism June 2009, p. 10 Appeals Nov./Dec. 2009, p. 35 Rebold, Jonathan, Block, Gertrude, Kasten, Bruce J., Torts & Negligence Feb. 2009, p. 24 Legal Writing Jan.–Nov./Dec. 2009 Point of View Sept. 2009, p. 38 Reddy, Anne, Castiglione, Joseph F., Kay, Bradley D., Torts & Negligence Feb. 2009, p. 24 Criminal Law May 2009, p. 20 Point of View Oct. 2009, p. 30 Rosenberg, Lee, Comiskey, William, Kaye, Judith S., Family Law June 2009, p. 30 Tax Law Nov./Dec. 2009, p. 10 Torts & Negligence Feb. 2009, p. 24 Schnapf, Lawrence, Cooper, Ilene S., Klein, Eve I., Real Property Law Feb. 2009, p. 47 Trusts & Estates Oct. 2009, p. 26 Point of View Sept. 2009, p. 38 Simek, John W., Dachs, Jonathan A., Knaier, Robert G., Law Practice Sept. 2009, p. 33 Torts & Negligence May 2009, p. 41 Torts & Negligence Jan. 2009, p. 10 Smedresman, Scott M., Torts & Negligence June 2009, p. 37 Krane, Steven C., Attorney Professionalism June 2009, p. 10 Davis, Anthony E., Attorney Professionalism June 2009, p. 24 Smith Roland B., Law Practice Sept. 2009, p. 28 Lane, Robert, Law Practice Mar./Apr. 2009, p. 38 Dickerson, Thomas A., Law Practice Oct. 2009, p. 40 Spivey, Gary D., Torts & Negligence Mar./Apr. 2009, p. 27 Lebovits, Gerald, History Jul./Aug. 2009, p. 10 Elkanich, David J., Legal Writing Jan.–Nov./Dec. 2009 Stein, Joshua, Law Practice Sept. 2009, p. 28 Lerner Jonathan J., Real Property Law Feb. 2009, p. 47 Forum, Committee on Attorney Attorney Professionalism Mar./Apr. 2009, Sussman, Edna, p. 33 Professionalism Arbitration / ADR Oct. 2009, p. 20 Lewis, David A., Jan.–October 2009 Swenson, Scott E., Attorney Professionalism June 2009, p. 24 Fox, Mark D., Commercial Law Feb. 2009, p. 20 Liebman, Bennett, Attorney Professionalism Feb. 2009, p. 10 Todres, Jacob L. History Jan. 2009, p. 33 Fox, Michael L., Point of View May 2009, p. 36 Littman, Rachel J., Attorney Professionalism Feb. 2009, p. 10 Trusiak, Robert G., Law Practice Sept. 2009, p. 16 Gershman, Bennett L., Torts & Negligence Jan. 2009, p. 39 Manz, William H., Criminal Law Jan. 2009, p. 24 Varon, Joanna R., History Mar./Apr. 2009, p. 10 Gottesman, Brian M., Point of View Sept. 2009, p. 38 Law Practice Jan. 2009, p. 44 Commercial Law Feb. 2009, p. 20 Weinberg, Philip, Law Practice June 2009, p. 46 Grace, H. Stephen, Jr., Environmental Law Jul./Aug. 2009, p. 46 Marrow, Paul Bennett, Evidence Jul./Aug. 2009, p. 24 Wilcox, Elliott, Arbitration / ADR Oct. 2009, p. 36 Greene, Arthur G., Law Practice May 2009, p. 46 Miranda, David P., Law Practice Sept. 2009, p. 23 Law Practice Nov./Dec. 2009, p. 46 Technology & the Law June 2009, p. 50 Gunther, Paris A., Wood, Robert W., Moar, Daniel B. Attorney Professionalism June 2009, p. 10 Labor & Employment Feb. 2009, p. 36 Commercial Law May 2009, p. 24 Hamid, Jyotin, Point of View Jul./Aug. 2009, p. 38 Munneke, Gary A. Labor & Employment Law Jul./Aug. 2009, Tax Law June 2009, p. 33 p. 34 Law Practice Feb. 2009, p. 44 Hancock, Barbara S., Law Practice May 2009, p. 32 Trusts & Estates Mar./Apr. 2009, p. 41 Law Practice Jul./Aug. 2009 p. 43 Harper, Robert M., Law Practice Sept. 2009, p. 10 Trusts & Estates Feb. 2009, p. 50 Nelson, Sharon D., Trusts & Estates Oct. 2009, p. 26 Law Practice Sept. 2009, p. 33 Harrison, Robert E., Noonan, Bran, Tax Law Nov./Dec. 2009, p. 43 Technology & the Law Oct. 2009, p. 10

50 | November/December 2009 | NYSBA Journal NYSBABOOKS

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uestion: Are the two words judicial decision that may be used as a such is a parenthetical insertion, so it is – incident and incidence – syn- standard in subsequent similar cases.” always enclosed in commas. Qonyms? Recently I’ve been The non-legal meaning is less strin- In the sentence, “The board of seeing them used with the same mean- gent, but similar: “an act or instance directors, as such, is responsible for ing, and I wonder whether that is just that may be considered as an example decision-making,” as such means “in careless writing or the words have in similar circumstances.” that capacity.” And in the sentence, become synonyms. The noun precedence has the general “Hourly pay, as such, was the main Answer: The two words are not meaning of “an act, state, or right that point of contention,” as such means “in synonyms. An incident is a single event carries the authority to precede.” It itself.” So the problem with as such is or a separate and definite experience. also has a second meaning, “priority.” not its vagueness, but its improper use It may describe some routine or unim- When precedence means “priority” it is by the writer. portant occurrence seen as part of a pronounced with second-syllable stress Question: I have seen the word continuum. An incident can also be an (precedence, the letter e pronounced as it zeugma and looked up its meaning, occurrence that temporarily interrupts is in the alphabet). Pronounced with but I still do not understand it. Can the normal sequence of events, or even its usual first-syllable stress, precedence you provide a better definition than an important occurrence that changes also contains a more specific meaning: this one: “Zeugma is a construction history – for example, “an internation- “a ceremonial order of rank observed in which a word is used to modify or al incident.” As an adjective, incident on formal occasions.” govern two words, often so that its use describes a happening that arises from Question: What is the meaning of is grammatically or logically correct or acts as a concomitant of something that vague phrase as such? Here it is, with only one”? else, as in, “Substantial loss of prop- in a quote on the editorial page of a Answer: That solemn definition is erty was incident to the flooding of national newspaper: not much help without some examples. lowlands.” The weight of checked-in bags Zeugma is a literary device often used On the other hand, although dic- is measured and priced, but the for humor because of the incongruity tionaries list an “act” as one meaning weight of carry-on bags is not. of the examples provided. Poets have of incidence, that noun does not usually As such, many travelers are stuff- always taken advantage of zeugma for refer to a single, perhaps unimportant ing their carry-ons to the hilt and that effect. For example, the English experience or occurrence. The noun posing a greater safety hazard as poet Alexander Pope used zeugma (in incidence refers instead to the rate, their numbers multiply and over- his poem “The Rape of the Lock”) to manner, or frequency of an occurrence head storage areas hold that added describe the English Queen Anne in as it relates to an untoward result. For weight. (Emphasis added.) these words: example, “The incidence of tuberculosis Answer: Actually, the phrase as Here Thou, great Anna! in developing countries has resulted in such is not vague but, as seen in the whom three Realms obey, a soaring death rate.” quotation the reader provided, it is Dost sometimes Counsel take – Writers confuse the two nouns often incorrectly used – and unclear. and sometimes Tea.” because the plural of incident sounds Instead of as such, the sentence connec- (Note: To hear the rhyme, you have exactly like the singular of incidence. tor therefore would have been correct. to know that in the 18th century “tea” So when they write, people think of an (In addition, later in the same sentence, was pronounced “tay.”) incident, but they spell it incidence – and the vague modifier they is ambigu- The noun zeugma is derived from then incorrectly add a plural. So they ous; does “they” refer to the number the Greek verb meaning “to yoke.” speak or write “one incidence” and of “travelers” or of “carry-on bags”? Another way to define zeugma is to “several incidences.” One such response But the reader did not ask about that call it “semantic incongruity” – the was given by the national vice president problem.) yoking of two unrelated objects by a of government relations of the NAICU As for the phrase as such, it is a sen- single verb, thus providing humor. (National Association of Independent tence-connector with specific mean- You may not find Pope’s description Colleges and Universities): “We had ings, always referring to the closest of his Queen to be uproariously funny, not expected to find so many incidenc- antecedent noun. It means “in that but neither does it fit the solemn defi- es of students . . . dropping out.” (She capacity,” or “in or by itself” or “being nition the reader quoted. meant to say “incidents.”) the person or thing just referred to.” Here are some more examples: Lawyers are familiar enough with For example, in the statement, “The The robber took my advice and a similar pair, precedent and precedence legal profession, as such, does not my wallet. that they do not misuse them, although receive the respect and command it is non-lawyers often do. The legal mean- entitled to,” as such means, “the pro- ing of precedent, as lawyers know, is “a fession just referred to.” The phrase as CONTINUED ON PAGE 56

52 | November/December 2009 | NYSBA Journal NEW MEMBERS WELCOMED

FIRST DISTRICT Samuel Kouamou FIFTH DISTRICT Nakisha McCants Angela Sheffler Abreu Christopher John Ntonme Ashley Marie Greiner Yana Pechersky Stephanie H. Adaniel Alvarado Carly L. Press Justin Lee Nottingham Olga A. Posmyk Monica Aryitey Vanessa Antoinette Alphonsa Jarrod William Smith Ruth Slomowits Jonathan David Ash Collin Earle Bailey Puthiyamadam Michael Uvaydov Erica Beth Askin Patrick H. Barth Thomas Jeremiah Reese SIXTH DISTRICT Keaton Wong Michele Lee Backus Stacie Lyn Bennett Eric Z. Reimer Robert McKertich William Sei-Hyun Yoon Joanne Hashim Badr Richard Alan Beyman Erin Hayes Rump Christine Elizabeth Jonathan P. Brose Reza Sarbakhsh SEVENTH DISTRICT TWELFTH DISTRICT Barnwell Maria C. Caceres- Clara S. Schauman Timothy Joseph Oluwatosin Adenike Terri Anne Benedetto Boneau Robert Hugh Schlosser Brennan Adeniyi Andrew Marshall Cassandra Marie Raven Shae Sealy James Douglas Epp Christine Elizabeth Bernie Celestin Mordechai Serle Natella Feinstein Camacho Radhika Bhattacharya Nigel R. Codrington Eli Robert Shahmoon Megan E. Gullace Sharon Gail Matthie Allison Hagan Binder Richard D. Cuiffo Akiva Shapiro John G. Luther Aubrey Ward Paul Michael Blyschak Rebecca Davis Hong Henry Shi Carrie Marie Mason Carole Bodin Giro DeSimone Harlan Jay Silverstein Aleksandar Nikolic THIRTEENTH Bradford Alexander Carol Desmond Keith James Slattery DISTRICT Boyd Jason L. Ederer John Robert Sobolewski EIGHTH DISTRICT Joseph C. Sant Joseph Andrew Boyle Christopher Calvin James H. Stevralia Rachel M. Hess Guy R. Tardanico Kevin Scott Brotspies Elders Niya Tang Willard J. Magavern Adam Buchwalter Justin E. Ellis Craig Scott Unterberg Frank Richard OUT OF STATE Gregory Shaun Burnett John James Engel Charles Hayden Van Passafiume Bekhzod Christopher John Cahill Andrene Vanessa Gorder Jennifer Marie Smith Abdusamatovich Justin Royal Carlucci Fairweather Desiree Verdejo Abdurazzakov Noah Davis Carr Gregory Charles Farrell Joseph F. Voyticky NINTH DISTRICT Charles P. Abraham Tae-Jin Cha Irina Fayman Aryeh Weinstein Rebecca Ivy Blum Evan Lawrence Abrams Weitseng Chen Jennifer Danielle Frank Lisa Sohayegh Weitz Jeannie Gallego William Eugene William Howell Diane B. Kaplan Hamilton Fyfe Whitney Cori Beth Katz Patricia L. Gannon Andre Damian Williams Keturah Rebecca Ladd Pro Bono Opportunities Phoebe Asrat Gebre Denise S. Wong Casey Suzanne McCabe Guide Ariel Goldman Karen Yeh Brooke Jones Robert M. Hayden Valerie Ann Zondorak Oppenheimer Now Online Nicholas Roth Hector Kevin Zuzolo Shalu Rajan Jean Ballantyne Hegeler Carmelita A. Riley Karla Louise Hughes SECOND DISTRICT David M. Rosoff www.nysba.org/volunteer Kimberly Kalmanson Suzana Carlos Merrill Neil Rubin Jeeyeop Kim Yvonne Obaigeli Ike Jennifer B. Schramm Looking to volunteer? Kathleen Kim Erica T. Kagan Andrew Reid Schwartz This easy-to-use guide will help you Cynthia Elaine Spensyr Ann Krebsbach William E. Seeger find the right opportunity. Kingston Igor G. Kuperman Marion M. Walsh You can search by county, by subject Juanita Lasprilla Sean W. McBride area, and by population served. Won Hyung Lee Olga Medyukh TENTH DISTRICT Mindy Lo Robert P. Mullagan Kevin Bowman Sebastian J. Lovera Riso Ryan Nathaniel John Anthony Cacchioli Jason F. Lowe Petersen Michael Calcagni Mandy Jo Lundstrom Darren Gerard Rooney Madge Greenblatt David Matthew Mann Charles Turner Fay Rebecca Mattana Amanda Lauren Danielle Nikole Young Elizabeth B. McCarthy Marzbani Janet Puthuparampil Matthew D. Matatof THIRD DISTRICT Ellen M. Snow Hilde Marie Matthee John Althouse Cohen Jessica D. Sparacino John Patrick Keith Hisao Hirokawa Elizabeth S. Stein McDonough Lev Samuel Jacoby Jessica Terranova Questions about pro bono service? Rakesh Joseph Michael Megan Elizabeth Jessica S. Winik Visit the Pro Bono Dept. Web site for more Stephanie Claire Miller O’Brein Susan Wong information. www.nysba.org/probono Robert Anthony John D. Rodgers Miranne (518) 487-5641 Robert Stevenson ELEVENTH DISTRICT Divya Mittal [email protected] Rosborough Kathy Kim Deanna Carmen Scesny Dimple Kumar

NYSBA Journal | November/December 2009 | 53 Mark Englund Bruce Cannon Gibney Steven Joseph Keough Jonathan August Martin Ellie Paula Satz Christensen Lee Ann Gillespie- Alia Jehan Khan Pamela Ann May Jesse A. Saul Gary Bart Clark White Peter Kim Aisling Margaret Jere Stuart Segrest Jared Cohane Eric Wayne Golightly Aisha Elizabeth King McAllister Simon Jun Seida Barry Lee Cohen Jonathan Wilfred Terel Lawrence Klein Jane Margaret Brittain Weaks Sexton Jon David Corey Greene Barbara Christine McCarthy Melissa Marie Sharp Eric Randolph Ian Vaidya Gullapalli Kluessendorf Colleen Robin Jonathan Shub Cottle Michal Haimov Alexander Koganov McClafferty Tara Margaret Smith Nelson Santo DaCunha Daniel Robert Hamad Olga Kondrashova Robert Leonard Adam Snitkoff David Bishop Adam James Harvey Krassimire Raynov McKague Kristen Courtney Debenham John James Hays Kostov Michael John Messinger Soehngen Maria Demoirakou Lauren Marie Healy Monica Renee Matthew Paul Miller Marise Hosomi Shakira Dill Anneris Virginia Kostrzewa Vanya Taneva Spitzeck Morgan Daniel Ditch Hernandez James Michael Kramer Mincheva-Vichailak Kristin Michele Stoop Deborah Blossom Dong Victoria Beatriz Ron Kugan Romel Joseph Mirville Brianne Lee Stuart John Caleb Dougherty Hernandez Rebecca Jean Kulik Jack Alan Molenkamp Irene Sulaiman Lindsay Anne Dunn Michael James Hickey James Daniel Kuthe Wendy Benjamin Weiwei Sun Adam W. Edelstein Rawan Talat Hmoud Allicia Wae-jin Lam Morgan Barbara Ivarine Suri Nieves Julisa Edwards Dana Marie Hrelic Pierre Olivier Lancelin Edmon L. Morton Adam Michael Christopher George Eileen Hren Lindsey Lee Laughner Nicholas Ulysses Swanson Elko James Morrison Kathryn Faye Lazarev Murphy Kai Ling Tan Obianuju Yvonne Humphrey Kirsten Migee Lee Anne-Marie Theresa Migusa Teramura Erokwu Elizabeth Louise Hundt Seung Key Lee Naccarato Yuet Ming Tham Kathleen Dougherty Orla Margaret Hunt Irina Licandro Erika Beatriz Navarro Chad Marshall Troop Ewing Nnamdi Emmanuel Legrand Gandhi Lindor Ronald Louis Newman Nguyen Anh Tuan Laura Lucille Fairneny Iheakaram Melissa Rene Yung Tri Nguyen Vanessa Turner Renee Ann Fatovic Keiko Ishizaki Lombreglia Yaron Gavriel Nili Thankam Ann Varghese Alice Christine Ferot Jonathan Luis Jachym Carmen Hernandez Chandler Jay Nutik Nguyen Dang Viet Catherine Ann Ferrigno Eisha Jain Lonstein Sean Philip O’Connor Claudia Meredith Volk Leon Fine Christine Jean-Louis Hongtao Lu Forest Jean O’Neill- Eido M. Walny Leslie Ann Flora Michaelle Jean-Pierre Gang Luan Greenberg Jamilia Tashima Wang Keith Harris Forst Paula Denise Johnson Matthew Barry Lunn Adebukola Adedolapo Akihiko Watanabe Osuntogun Christopher Michael Peter W. Johnston Adam J. Lysinski Karin Weiss-Yacobi Priya Palvia Fox Thomas E. Jolas Jerome Michael Aaron Thomas-durussel Jody Frampton Jaclyn Bari Kass Maiatico Amit D. Patel Weston Hidetomo Futami Jennifer Lauren Daniel Maloney Erik Mahendra Patel David James Christle Raven Garvey Buchalter Katz Laura Stephanie Toral Pankajkumar Whitecotton Shahzeb Gaziani Sadaf Khadija Kazmi Manion Patel Sean Jeffrey Nicole Ann Gerritsen Kimberly Marie Craig Joel Mariam Tonia Ann Patterson Whittington Mark Douglas Gerstein Kempton-Serra Thomas More Marrone Gabriel Adam Pell David Alexander Chenyuan Peng Wilhite Diego Trindade Pereira Catherine Warner Dawn Marie Phillips Wilkes Karen Lee Prena Claire Elaine Wilson Xi Qin Ethan Charles Wood Karen Raihofer James Robert Wood Timothy Andrew Razel Richard A. Wright Stephanie Crain Reger Lauren Margaret Delia Carolina Reyes Yassine Leslie Denise Riley Iris Laura Yen Chelsey Sophia Rodgers Ku Yoo Gregory Romanovsky Christian Adam Young Christopher Anthony Min Yu Rossi Michaela Danielle Matthew Frank Rotman Zabbo Molly Moran Ryan Jordan Ivan Zaluski Gabriel Jose Salinas Kaiyun Zhang Martinez Shaobin Zhu Jeffrey Emanuel Andrew Stephen Salomon Zimmerman Daniel Thomas Saltus Isma Rani Zubair Nchunu Justice Sama Liron Zusman

54 | November/December 2009 | NYSBA Journal NEW YORK STATE BAR ASSOCIATION Foundation Memorials

fitting and lasting tribute to a deceased lawyer can A be made through a memor ial contribution to The New York Bar Foundation. This highly appropriate and meaningful gesture on the part of friends and associates will be felt and appreciated by the family of the deceased.

Contributions may be made to The New York Bar Foundation, One Elk Street, Albany, New York 12207, stating in whose memory it is made. An officer of the Foundation will notify the family that a contribution has been made and Lawyer Referral and by whom, although the amount of the contribution will not be specified. Information Service

All lawyers in whose name contri butions are made will Interested in expanding be listed in a Foundation Memorial Book maintained at your client base? the New York State Bar Center in Albany. In addition, the names of deceased members in whose memory bequests or contributions in the sum of $1,000 or more are made will be permanently inscribed on a bronze plaque mounted in the Memorial Hall facing the handsome courtyard at the Bar Join the Lawyer Referral & Information Service Center. Why Join? > Expand your client base > Benefit from our marketing strategies > Increase your bottom line

Overview of the Program The New York State Bar Association Lawyer Referral and Information Service (LRIS) has been in existence since 1981. Our service provides referrals to attorneys like you in 41 counties (check our Web site for a list of the eligible counties). Lawyers who are members of LRIS In Memoriam pay an annual fee of $75 ($125 for non-NYSBA members). Proof of malpractice insurance in the minimum amount of $100,000 is required Cindy Lou Beale Lloyd Manning of all participants. If you are retained by a Pleasantville, NY Marietta, GA referred client, you are required to pay LRIS a referral fee of 10% for any case fee of $500 or Andrew W. Bisset Arthur H. Rosenfeld more. For additional information, visit www. Greenwich, CT New York, NY nysba.org/joinlr. Paul R. Brenner Israel G. Seeger Bronxville, NY Peekskill, NY Sign me up Ira L. Freilicher Mario R. Silva Download the LRIS application at New York, NY Pittsford, NY www.nysba.org/joinlr or call 1.800.342.3661 Thurston Greene Kenneth D. Stein or e-mail [email protected] to have an application Millbrook, NY Yorktown Heights, NY sent to you. Susan Lehnhardt Geraldine P. Waldorf Princeton, NJ Nanuet, NY GGiveive uuss a ccall!all! Alfred D. Lerner Joseph M. Walsh New York, NY Flushing, NY 8800.342.366100.342.3661 Frank J. Litz Schenectady, NY

NYSBA Journal | November/December 2009 | 55 LANGUAGE TIPS After three days men grow weary, This is from Time magazine, CONTINUED FROM PAGE 52 of a wench, a guest, and rainy January 24, 1964. The story was quot- weather. (Benjamin Franklin) ed in Schrader and Frost, The Quotable Are you getting fit or having a fit? Potpourri Lawyer (1986). ■ [She] went straight home in a flood of tears and a sedan chair. (Charles You may have heard the often-quoted Dickens) anecdote about Hoyt A. Moore, a part- GERTRUDE BLOCK is lecturer emerita at the ner at Cravath, Swaine & Moore, whose University of Florida College of Law. She is the The Russian grandees came to colleague once told him that the firm author of Effective Legal Writing (Foundation Elizabeth’s court dropping pearls ought to hire more associates because Press) and co-author of Judicial Opinion Writing and vermin. (Thomas Macaulay) the staff was overworked. “That’s silly,” (American Bar Association). Her most recent There are three faithful friends – an Moore replied, “No one is under pres- book is Legal Writing Advice: Questions and old wife, an old dog, and ready sure. There wasn’t a light on in the office Answers (W. S. Hein & Co., 2004). money. (Benjamin Franklin) when I left at 2 o’clock this morning.”

THE LEGAL WRITER initial capitals for subject-line mes- tractions sounds awkward and fussy CONTINUED FROM PAGE 64 sages, but don’t capitalize short articles and makes readers feel scolded.27 easier, condense brief, casual e-mails or prepositions. Don’t end subject-line Using the uncontracted form in the into one paragraph. messages with a period. directive “Do not make extra copies This doesn’t mean that e-mail writ- Occasionally you can fit your entire of the report,” for instance, suggests ers should abandon all formalities of message in the subject line. This works that dire consequences will follow for correspondence for brevity. Maintain when the message is extremely brief doing so.28 Reserve the uncontracted a professional tone through proper and when asked to reply to a short, form for special emphasis.29 capitalization and word choice. Many simple question. Use the abbreviation Be sensitive when e-mailing to and traditional-correspondence rules apply “EOM” at the end of the subject line- from telephones. Smartphones like to e-mail.18 message.23 EOM means “end of mes- Blackberrys and iPhones are increas- Front load and summarize ques- sage.” It tells the recipient that the sub- ingly prevalent. Their small screens and tions and answers. If you’re asking a ject line is the complete message and cramped keyboards make writing con- question in your e-mail, ask it before that they needn’t waste time opening cisely and using the subject line to its you say why you’re asking. If you ask the message. full potential even more important. In the question up front, you’re more like- Format replies for clarity. Answer your quest for concision, never use, ly to get an answer; the reader is less at the top of an e-mail so that read- in a professional context, SMS (Short likely to stop reading before getting ers need not search through text.24 To Message Service) language, or “textese,” to your question.19 Another technique answer multiple questions or make like substituting “c u l8r” for “see you when you reply is to summarize the various points, organize replies with later.”30 This extreme form of abbrevia- question you were asked — and only numbers or letters. If you’re interlac- tion is like writing in another language. then answer the question.20 That’ll let ing your answer between paragraphs / Emoticons are inappropriate. your reader know you’re both on the of the original e-mail, use a different Emoticons are small faces made by same e-mail page. color, size, or font to set your writing combining colons, semi-colons, paren- Use the subject line to its full apart from the sender’s.25 theses, and other symbols. The author- potential. Attorneys are inundated Don’t overuse abbreviations. LOL! ities have different opinions about by e-mail. They must decide what to To be brief and to type quickly, it’s tempt- emoticons, but the consensus is that read and take care of first. An e-mail’s ing to use lots of abbreviations. This they don’t convey meaning in a profes- subject line often determines the deci- isn’t as time-saving as it might seem. sional setting.31 sion a recipient makes about when, or Abbreviations waste time if your e-mail, Correspondence littered with smi- whether, to deal with it. Use the subject filled with ambiguous abbreviations, ley and frowny faces looks juvenile. line to inform recipients of the e-mail’s requires the recipient to reply seeking It reveals the writer’s inability to find subject and purpose.21 clarification. The solution is to use them good words, phrases, and sentences. A recipient will be frustrated by sparingly.26 Stick with familiar abbrevia- Readers find emoticons annoying32 false or insufficient information in the tions that express your meaning. and disruptive. subject line. Include key information to Use contractions. Although con- All capitals are ineffective. All cap- let recipients evaluate quickly whether tractions are inappropriate in formal itals equals SHOUTING. Never use they’ve time to deal with your e-mail letters, contractions, which enable them, regardless of the context.33 at that moment. Don’t make your sub- readers to understand text quickly, are Exclamation points liven up e-mails! ject line too short or too long.22 Use encouraged in e-mails. Not using con- Because e-mail has no affect, “exclama-

56 | November/December 2009 | NYSBA Journal tion points can instantly infuse electronic determines the appropriate signa- for a flag harms the flag’s purpose and communication with human warmth.”34 ture. Not every e-mail requires a full your credibility.42 Use “urgent” and They show enthusiasm. Writing signature. Quick responses between “important” sparingly. “Congratulations!” is more expressive co-workers and friends about simple than writing “Congratulations,” which issues dispense with e-mail formalities, sounds apathetic or sarcastic. Don’t use including signatures. Alternatively, Never e-mail anything multiple exclamation points. Also, don’t consider correspondence between use exclamation points to convey nega- opposing counsel at the start of litiga- you wouldn’t want to tive emotion. It means you’re throwing tion. Signatures with full names and see in tomorrow’s a tantrum.35 titles are informative. Make the most newspaper. Avoid format embellishments. of this line to tell recipients whether Many e-mail programs offer options you wish to be addressed by your first to personalize e-mail. These options name, your last name, or a title. Never forward without permis- include different fonts and background Start smart. Don’t both begin and sion, but always assume that recipi- “wall paper” featuring pictures and end an e-mail with your name and who ents will forward without permis- clip art. Personalize with content, not you are. A formal, polite way to write sion. E-mail makes it easy to reply format embellishments. Stick to a plain is to introduce yourself up front but to with the click of a button. Forwarding font, like Times New Roman or Arial in sign your name only at the end. Thus: and carbon copying e-mail is just as black type,36 and 10- to 12-point type “I represent Mr. Y, the defendant in X simple. The ease with which you can size on a plain background. v. Y. Please telephone me tomorrow. pass along e-mail makes it tempting Project respect. Appropriate salu- Sincerely, John Smith.” Not: “My name to do so. But etiquette dictates that tations and closings express respect. is John Smith. I represent Mr. Y, the you not forward any e-mail unless you Writers should use salutations and defendant in X v. Y. Please telephone have the original sender’s permission. closings in most professional settings. me tomorrow. Sincerely, John Smith.” Also, when carbon copying (CC) or Sometimes official salutations and clos- Tell recipients how they can con- blind carbon copying (BCC) someone ings are unwarranted, as in a string of tact you. Include contact information unfamiliar to your reader, state the replies between peers or colleagues or below your signature. It sets the right reason for copying. among friends.37 business tone and shows your desire to Your commitment to following the If you’re unsure how to address be available to recipients. Include your rules of etiquette doesn’t guarantee your recipients, mirror the earlier cor- full name, title, organization name, that others will do the same. Assume respondence.38 When there’s no cor- telephone number, e-mail address, that any e-mail you write will be for- respondence, the following are helpful mailing address, Web site, fax number, warded, copied, and blind copied to salutations and closings. Use last names and other relevant information.41 Save others without your permission.43 and titles until you’re told otherwise. time with your e-mail program’s auto- Protect your wish that your mail For an individual, “Dear Mr./Ms. [last matic signature-line feature. remain with your recipient by placing name]:” is always appropriate. If you’re Announce prolonged absences. that request in the subject line and in unsure whether your relationship is Tell correspondents when you’ll be your e-mail’s body. These precautions familiar enough to allow first names, away from your e-mail for more than don’t guarantee compliance. E-mail “Dear [first name] (if I may),”39 allows a day or two. If you don’t, they might isn’t confidential. Don’t assume it is.44 informality and addresses whether e-mail expecting quick action and grow Don’t abuse e-mail. Sending unso- first names are appropriate. frustrated when you don’t reply. Use licited advertisements to a mass list of These closings aren’t comprehen- your e-mail software’s “Out of Office” recipients (SPAM) is like clogging up sive, but they’re a start to your find- function to send an automatic reply your friends’ and colleagues’ inboxes ing the appropriate ending to corre- announcing your absence. Or set your with unwanted jokes and chain mail. spondence: “All best,” “All the best,” program to forward mail to an account Don’t be a spammer. “Best,” “Best regards,” “Best wishes,” you’ll monitor while you’re away. Note e-mail policies. Most large “Cordially,” “Regards,” “Respectfully,” Limit urgent e-mail. E-mail pro- employers have e-mail policies. Follow “Sincerely,” “Sincerely yours,” and grams contain an option to flag or them. “Yours.”40 highlight messages as “urgent” or Beware of using business e-mail for Sign your e-mail. An e-mail “important.” This option helps senders personal use. Most large companies exchange might be your only corre- and recipients supplement informa- can access their employees’ e-mail and spondence with a recipient. Signatures tion in the subject line, but only if the hard drives. If in doubt, never e-mail tell recipients how you like to be “urgent” or “important” designation is anything you wouldn’t want to see in addressed and signal that the e-mail accurate. Using flags to entice recipi- tomorrow’s newspaper.45 Never send is complete. The context of your e-mail ents to read e-mail that doesn’t qualify CONTINUED ON PAGE 58

NYSBA Journal | November/December 2009 | 57 Good protocol makes e-mail personal matters. Don’t clog up your Check and explain attachments. inbox. Deal with your mail and then Correspondents can instantly share fit to print. discard it or place it in a folder. documents by attaching them to Take the time to respond appro- e-mails. This useful feature requires inappropriate mail, let alone to or from priately. The immediacy of e-mail careful attention. First, consider your office e-mail address.46 leads people to send messages before whether to send a document by e-mail. Your company might require a dis- they’ve fully thought through their Sending large files (anything over two claimer at the end of your e-mail to ideas. Combined with the constant or three megabytes) causes problems. specify the level of privacy assigned to access to e-mail, instantaneous e-mail Many servers block large e-mails. Or an e-mail communications and a warning correspondence leads to situations in e-mail that goes through might exceed that the e-mail shouldn’t be used out- which senders often wish they could the memory capacity of the recipi- side its stated context. take their message back. This is wish- ent’s inbox, causing it to crash. Next, The New York State Bar Association ful thinking: “No one will remember remember to attach a document when provides a sample e-mail policy in its that you responded instantaneously. you state in your e-mail that you’re resources for small and solo practice Everyone will remember if you respond attaching it. Also, explain early in the firms.47 The sample includes a list of risks inappropriately.”50 e-mail message what you’ve attached, and liabilities, legal requirements to use Some people are always online. in what form, and why. Finally, attach company e-mail, and suggested format When they press the “send” button, the correct document, especially when for company e-mail. The policy is helpful their computer immediately sends dealing with sensitive materials. if you’re setting up an e-mail system. the e-mail. Most e-mail programs Use your address book wisely. allow an intermediate step between Most e-mail programs offer options E-Mail Tips sending e-mail and its actual delivery: to store contacts in an address book. Here are some tips to make writing, the outbox feature. An outbox works This allows you to maintain a database sending, and receiving e-mail efficient like your home mailbox. You place of e-mail addresses to send e-mails and hassle-free. the letter in the box, but it isn’t sent without searching for addresses. Ready Fill in the address box only when until the letter carrier picks it up.51 access to your contact list might lead to you’re ready to send. The ease of Set your program to send all e-mails costly mistakes. Confusing your intend- sending out mass e-mail, purposely in the outbox at a particular time or ed recipient is embarrassing. Although or inadvertently, means that you must only when you manually empty the it’s impractical to maintain separate take care when addressing your mes- outbox. In the meantime, the e-mail address books for each contact, main- sage. To avoid sending an e-mail before is in the outbox and available to edit tain separate address books for media,53 you’re ready, write your entire e-mail, or delete. professional, and personal contacts. do all your edits, and proofread before This feature also helps those who Save time: Set up group e-mails. you fill in the address box.48 e-mail outside business hours. Setting When you’re collaborating on a project Make managing e-mail part of your outbox to deliver all messages or regularly exchange e-mail with a set of your daily tasks. If the constant inflow at 9:00 a.m. will hide that you were recipients, set up a group e-mail list. This of mail becomes overwhelming, set up awake at 4:00 a.m. when you wrote it. assures completeness and saves time. a schedule to read e-mail just as you Watch out for Reply All. The “Reply Request an acknowledgment of would an appointment.49 Otherwise, All” feature is convenient to exchange receipt. If you’re concerned that your read e-mail as received. responses with a large group. The fea- recipient might not receive an e-mail Start by answering e-mails that ture can turn disastrous if used in error. with time-sensitive or other important require a response. If you can’t give The horror stories are well known, but information, request an acknowledg- the e-mail full attention, send a quick the mistakes continue. ment of receipt. Most e-mail programs response to let the sender know that Use CC and BCC properly. Several have an option to do this, but you can you received the message and that a options let senders address messages. also request an acknowledgment in more complete response awaits. The “To” box should include all those the body of your e-mail. Not all e-mail Set up a filing system. Most e-mail to whom the message is directed. The communications require acknowledg- programs allow multiple folders you “CC” box is reserved for those who ment. Give yourself peace of mind, but can add to manually or automatical- should receive the message for infor- don’t burden recipients. ly based on your criteria. Consider a mational purposes but from whom Rely on timestamps cautiously. pending folder for e-mail you must no response or action is required. The Each e-mail message sent or received deal with later, a monthly or weekly “BCC” box works the same way as is stamped with date and time infor- review folder for follow-up exchanges, the “CC” box but preserves recipients’ mation. This information is good for a permanent folder for mail you must anonymity.52 documentation, but it’s not 100% accu- never delete, and folders for clients or rate.54 Glitches in computer software

58 | November/December 2009 | NYSBA Journal and other electronic anomalies result ally discoverable in lawsuits,60 consider 29. Id. 30. Wikipedia, SMS Language, http:// in inaccurate timestamps. the legal implications of what you write. en.wikipedia.org/wiki/SMS_language (last visited Be careful with interoffice e-mail. Oct. 14, 2009). Interoffice e-mail systems offer options Conclusion 31. Bouchoux, supra note 9, at 141. and features different from personal Corresponding with the click of a but- 32. Mac Avoy et al., supra note 4, at 51. e-mail programs. Some interoffice sys- ton instead of dropping an envelope 33. Grossman, supra note 22; Mac Avoy et al., supra note 4, at 51. tems allow access to the “Properties” into a mailbox doesn’t give you license 34. Shipley & Schwalbe, supra note 8, at 137. of e-mail exchanges to permit senders to become complacent. When attor- 35. Id. at 138. to check when their recipients read a neys correspond in their professional 36. Id. at 97–98. message, how long the recipient looked capacity, it reflects on their capacity as 37. Id. at 107. at a message, whether the recipient professionals. ■ 38. Id. at 110. deleted a message, and whether the 39. Id. at 105. 40. Id. at 108. recipient forwarded a message. Each 1. Kaitlin Duck Sherwood, A Beginner’s Guide to Effective Email, http://webfoot.com/advice/email. 41. Id. at 114–15; Stack, supra note 21. system is unique. Be aware of these top.php (last visited Oct. 14, 2009). 42. Shipley & Schwalbe, supra note 8, at 95–96. possibilities. 2. Id. 43. Stein, supra note 16, at 10. Save your recipient’s time with 3. Thomas E. Kane, Letters for Lawyers: Essential 44. Bouchoux, supra note 9, at 141. “No reply needed.” In an age when Communications for Clients, Prospects, and Others 45. Mac Avoy et al., supra note 4, at 51; Shipley & ix (2d ed. 2004). Schwalbe, supra note 8, at 61 (“Never send any- so many e-mails are exchanged daily, 4. Janice Mac Avoy et al., Think Twice Before You thing to a business email address that the recipient include a notation in e-mails sent only Hit the Send Button! Practical Considerations in the Use would be embarrassed to have the entire company for informational purposes that no of Email, 54 Prac. Law. 45, 45 (Dec. 2008). read.”). reply is needed.55 5. Wayne Schiess, Email Advice Part 2, Austin Law. 46. Bouchoux, supra note 9, at 141. 6 (June 2009). 47. New York State Bar Association Solo and 6. Kane, supra note 3, at ix. Small Firm Resource Center, http://www. E-Mail and the Law 7. Tom Goldstein & Jethro Lieberman, The nysba.org/AM/Template.cfm?Section=For_ E-mail etiquette is important for attor- Lawyer’s Guide to Writing Well 62 (2d ed. 2002). Attorneys&TEMPLATE=/CM/ContentDisplay. neys because “[e]mail leaves a written, 8. David Shipley & Will Schwalbe, Send: Why cfm&CONTENTID=14569 (last visited Oct. 14, People Email So Badly and How To Do It Better 53 2009). time stamped, and traceable record of (2d ed. 2008). 48. Mac Avoy et al., supra note 4, at 49. your lazy habits, and flip email replies 9. Deborah Bouchoux, Aspen Handbook for Legal 49. See Dennis M. Kennedy & Tom L. Mighell, can come back to haunt you.”56 Writers 141 (2005). The Lawyer’s Guide to Collaboration Tools and Not all e-mail between attorneys 10. Id. Technologies: Smart Ways to Work Together 127 11. Monte Enbysk, Microsoft.com Small Business (2008) (advising readers to use “triage” on their and clients is privileged: “[E]mail com- Center, Email Etiquette at Work, http://tech.msn. inbox by identifying which e-mails must be dealt munications in which legal advice is com/howto/article.aspx?cp-documentid=812126 with immediately, which require action but can wait (last visited Oct. 14, 2009) (defining “flame” mail as for a response, and which can be deleted immedi- neither sought nor given are not neces- ately because they are of no future use.) sarily privileged and could be discov- e-mail that’s terse, critical, or venomous). 12. Shipley & Schwalbe, supra note 8, at 11–13. 50. Mac Avoy et al., supra note 4, at 50. 57 erable.” Avoid off-topic banter when 13. Enbysk, supra note 11. 51. Jonathan Soll, Managing Electronic Data Risks Through an Email Retention Policy, 18 Am. Corp. corresponding with clients. 14. Bouchoux, supra note 9, at 141. Counsel Ass’n Docket 18, 25 (Apr. 2000). You’re responsible for your mail. 15. Id. at 140. 52. Shipley & Schwalbe, supra note 8, at 59–60. 16. Joshua Stein, How to Prevent Email The costs of misdirecting e-mail con- 53. Mac Avoy et al., supra note 4, at 50. taining confidential information are Embarrassments, Control the Email Deluge, and Get People to Read the Email You Send, 19 Prac. Real Est. 54. Shipley & Schwalbe, supra note 8, at 50–51. incalculable. Check and double check Law. 7, 9 (Jan. 2003). 55. Id. at 54. the accuracy of a recipient’s address. 17. Shipley & Schwalbe, supra note 8, at 132. 56. Kennedy & Mighell, supra note 49, at 125. Attorneys are charged with a standard 18. See generally Kane, supra note 3 (containing sam- 57. Christopher Wesser, Ethical Considerations and the Use of Email, 49 For the Def. 68, 71 (Feb. 2007). of care that includes “carefully check- ple letters and examples of legal correspondence). 19. Wayne Schiess, E-Mail Like a Lawyer, Student 58. Mac Avoy et al., supra note 4, at 48. ing the addresses prior to sending an Law. 22, 25 (May 2007). 59. Veda Charrow et al., Clear and Effective Legal e-mail and ensuring that privileged 20. Id. at 26. Writing 16-17 (4th ed. 2007). information is not inadvertently sent to 21. Laura Stack, 12 Tips for Better E-mail Etiquette, 60. Soll, supra note 51, at 19. a third party.”58 http://office.microsoft.com/en-us/outlook/ HA012054101033.aspx (last visited Oct. 14, 2009). GERALD LEBOVITS is a judge of the New York Consider the impact and repercus- 22. Mark Grossman, Email Etiquette is Important, City Civil Court, Housing Part, in Manhattan sions each e-mail might have. Arthur http://www.ecomputerlaw.com/articles/show_ and an adjunct professor at St. John’s University Andersen’s fall can be attributed to an article.php?article=2008_email_etiquette_is_impor- School of Law. For their research, he thanks Anderson in-house attorney’s e-mail tant (last visited Oct. 14, 2009). law students Alyssa Wolf (New York Law), Alex 23. Shipley & Schwalbe, supra note 8, at 88. directing staff to follow its document de Richemont (Harvard), and Joshua Cohn (St. 24. Id. at 158. John’s). For her suggestion to write this column, retention policy — a direction to shred 25. Id. 59 he thanks Martha Cohen Stine, Esq. Judge documents. Because electronically 26. Bouchoux, supra note 9, at 141. Lebovits’s e-mail address is [email protected]. stored data, including e-mail, is gener- 27. Shipley & Schwalbe, supra note 8 at 132. 28. Id. at 133.

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62 | November/December 2009 | NYSBA Journal 2009-2010 OFFICERS MEMBERS OF THE HOUSE OF DELEGATES

MICHAEL E. GETNICK FIRST DISTRICT Golinski, Paul A. Tilton, Samuel O. Aaron, Stewart D. Hall, Thomas J. * Vigdor, Justin L. President Abernethy, Samuel F. Hernandez, David J. * Witmer, G. Robert, Jr. Utica Abramowitz, Alton L. Kamins, Hon. Barry EIGHTH DISTRICT †* Alcott, Mark H. Longo, Mark A. Bonarigo, Benjamin J. STEPHEN P. Y OUNGER Alden, Steven M. Lonuzzi, John A. Chapman, Richard N. Anello, Robert J. McKay, Hon. Joseph Kevin Convissar, Robert N. President-Elect Badner, Lisa Ray Park, Maria Y. Effman, Norman P. New York Badway, Ernest Edward Romero, Manuel A. Fisher, Cheryl Smith Bailey, Lawrence R., Jr. Shaikh, Heena * Freedman, Maryann Saccomando Baum, Simeon H. C. BRUCE LAWRENCE Sunshine, Hon. Jeffrey S. Gerstman, Sharon Stern Berke-Weiss, Laurie Szochet, Diana J. * Hassett, Paul Michael Secretary Blanchard, Kimberly S. THIRD DISTRICT Manias, Giles P. Rochester Bohorquez, Fernando A., Jr. Ayers, James B. O’Donnell, Thomas M. Bransten, Hon. Eileen Barnes, James R. 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Van Scoyoc, Carol L. Patricia L. R. Rodriguez, Schenectady James, Hon. Debra A. Weis, Robert A. Kanter, Gregg Herbert Ferradino, Stephanie W. Haelen, Joanne B. TENTH DISTRICT FIFTH DISTRICT Kennedy, Henry J. Kera, Martin S. Herrmann, Diane M. Asarch, Hon. Joel K. David M. Hayes, Syracuse * King, Henry L. Lais, Kara I. Block, Justin M. †* Krane, Steven C. Martin, Trinidad * Bracken, John P. Rodriguez, Patricia L. R. Chase, Dennis R. SIXTH DISTRICT Larson, Wallace L., Jr. Lau-Kee, Glenn Stanclift, Tucker C. Cooper, Ilene S. †* Leber, Bernice K. Sterrett, Grace Fishberg, Gerard David A. Tyler, Ithaca Vanier, Stephen A. Franchina, Emily F. Leo, Robert J. Gann, Marc Lesk, Ann B. Watkins, Patricia E. SEVENTH DISTRICT Wood, Jeremiah Good, Douglas J. Levy, M. Barry Gross, John H. David M. Schraver, Rochester Lieberman, Ellen FIFTH DISTRICT Fennell, Timothy J. Gruer, Sharon Kovacs Lindenauer, Susan B. Hendry, Melanie Dyani * MacCrate, Robert Fish, Marion Hancock EIGHTH DISTRICT Gall, Erin P. Karabatos, Elena Martin, Edwina Frances †* Levin, A. Thomas Sharon Stern Gerstman, Buffalo McEnroe, Diane Crosson † Getnick, Michael E. Gigliotti, Louis P. Levy, Peter H. Miller, David S. Luskin, Andrew J. Miller, Michael Gingold, Neil M. NINTH DISTRICT Makofsky, Ellen G. Millett, Eileen D. Greeley, Kristin B. McInerney, Christine Marie John S. Marwell, Mount Kisco Minkowitz, Martin Hartnett, Elizabeth A. Mejias, Linda Kelly Morgan, Hadaryah Tebach Hayes, David M. * Pruzansky, Joshua M. Morril, Mark C. Howe, David S. TENTH DISTRICT Purcell, A. Craig Morton, Margaret S. Larose, Stuart J. * Rice, Thomas O. John H. Gross, Hauppauge Nathanson, Malvina Ludington, Hon. Spencer J. Robinson, Derrick J. Nelson, Lester Mitchell, Richard C. Winkler, James R. O’Neill, Paul J., Jr. Peterson, Margaret Murphy ELEVENTH DISTRICT * Patterson, Hon. Robert P., Jr. * Richardson, M. Catherine ELEVENTH DISTRICT David Louis Cohen, Kew Gardens Plevan, Bettina B. Stanislaus-Fung, Karen Cohen, David Louis Prowda, Judith B. Tsan, Clifford Gee-Tong Gutierrez, Richard M. Reed, Thomas A. Virkler, Timothy L. James, Seymour W., Jr. TWELFTH DISTRICT Lee, Chan Woo Rosenthal, Lesley Friedman SIXTH DISTRICT Rosiny, Frank R. Lomuscio, Catherine Lawrence R. Bailey, Jr., Bronx Barreiro, Alyssa M. Nizin, Leslie S. Rosner, Seth Denton, Christopher Rothstein, Alan Terranova, Arthur N. THIRTEENTH DISTRICT Fortino, Philip G. Vitacco, Guy R., Jr. Russell, William T., Jr. Grayson, Gary J. Safer, Jay G. Walsh, Jean T. Jonathan Bruce Behrins, Staten Island Gutenberger, Kristin E. Wimpfheimer, Steven Schindel, Ronnie Lewis, Richard C. Sen, Diana Sagorika †* Madigan, Kathryn Grant TWELFTH DISTRICT MEMBERS-AT-LARGE OF THE * Seymour, Whitney North, Jr. Mayer, Rosanne Masley, Hon. Andrea Sherwin, Peter J.W. Pogson, Christopher A. * Pfeifer, Maxwell S. EXECUTIVE COMMITTEE Sigmond, Carol Ann Tyler, David A. Price, Hon. Richard Lee Silkenat, James R. Quaranta, Kevin J. Timothy J. Fennell SEVENTH DISTRICT Smith, Hon. George Bundy Sands, Jonathan D. Hermes Fernandez Brown, T. Andrew Schwartz, Roy J. Sonberg, Hon. Michael R. Burke, Philip L. Spiro, Edward M. Summer, Robert S. Glenn Lau-Kee †* Buzard, A. Vincent Weinberger, Richard Syracuse, Vincent J. Gould, Wendy L. Ellen G. Makofsky Tesser, Lewis Harren, Michael T. THIRTEENTH DISTRICT Wachtler, Lauren J. Jackson, La Marr J. Behrins, Jonathan Bruce Eileen D. Millett Wolff, Adam John Kingsley, Linda S. Mattei, Grace Virginia Yates, Hon. James A. Sieghardt, George A. David P. Miranda Kurland, Harold A. Yavinsky, Hon. Michael J. Laluk, Susan Schultz Sipp, Thomas A. † Younger, Stephen P. Peter J.W. Sherwin Lanzafame, Ross P. OUT-OF-STATE Zulack, John F. Lawrence, C. Bruce Bartlett, Linda G. Lauren J. Wachtler SECOND DISTRICT Lightsey, Mary W. Elder-Howell, Andrea M. Adler, Roger B. McKeon, Hon. Michael F. * Fales, Haliburton, II Bonina, Andrea E. * Moore, James C. Kurs, Michael A. Cohn, Steven D. * Palermo, Anthony R. Ravin, Richard L. Dollard, James A. Schraver, David M. Torrey, Claudia O. Doyaga, David J., Sr. Smith, Thomas G. * Walsh, Lawrence E. † Delegate to American Bar Association House of Delegates * Past President

NYSBA Journal | November/December 2009 | 63 THE LEGAL WRITER BY GERALD LEBOVITS

E-Mail Netiquette for Lawyers

lectronic mail, called “e-mail” ents, and courts.6 Others criticize the accomplished. Just click the “send” and often spelled “email,” has informal and sloppy writing common button and it’s the other guy’s respon- Eelectrified the practice of law. in e-mails. To them, “the e-mail culture sibility. Clarifying tasks by telephone E-mail is invaluable. It’s “cheaper and is transforming us into a nation of hur- or in person avoids this trap. faster than a letter, less intrusive than ried, careless note makers.”7 Interpret generously. Just as a phone call, [and] less hassle than a The following etiquette rules out- e-mail writers must consider the tone fax.”1 It eliminates location and time- line general concepts and apply to all recipients might assign to the text, so zone obstacles.2 forms of electronic mail, regardless of must recipients generously interpret E-mail isn’t perfect. Attorneys are the recipient. the writer’s text.14 Recipients should besieged by the volume of e-mails. It’s Don’t hide behind the electronic assume the best of the writer to avoid hard to sort through the mix of solici- curtain. Easy access to e-mail leads to overreacting to a text that might be tations, SPAM, correspondence, and the common but poor practice of rely- brief, hostile, or unclear. Avoid misun- critical, time-sensitive information. ing on e-mail’s impersonal characteris- derstandings by giving e-mail writers One result: “people are either annoyed tics to deal with things better done in leeway when deciphering meaning. by the intrusion [of e-mail] or are person. The mantra must be “Never do Always edit. Avoid confusion overwhelmed by the sheer number of anything electronically that you would through editing. Reading what you’ve e-mails they receive each day.”3 E-mail want others to do to you in person.”8 written will let you see how an intend- also leads to misunderstandings.4 E-mail writers must ask themselves: ed recipient might misinterpret your Despite its problems, e-mail is an “Would I say this in person?”9 Asking writing. An example of this is an essential tool. Attorneys must make this question reduces the potential to e-mail that reads “I resent your mes- the most of it — so long as the attor- use e-mail for an exchange best suited sage” when the writer meant to say, “I ney follows this good advice: “Think. for oral communication. re-sent your message.”15 Pause. Think again. Then send.”5 This End confrontations. If communica- Editing includes more than read- column reviews e-mail etiquette, e-mail tion leads to confrontation, end the ing for meaning. It means checking tips, and e-mail’s implications for the dialogue and, if appropriate, agree to spelling and grammar. Informality like legal profession. Good protocol makes speak by telephone or in person.10 making typos or using only lowercase e-mail fit to print. E-mail is an imperfect way to resolve letters is fine between friends. It has no differences. Unlike oral communica- place in professional correspondence. Etiquette tion, e-mail provides no tone or inflec- To ensure credibility and respect, avoid Lawyers must consider the e-mail’s tion. The reader must assign charac- grammar and spelling errors. Use your recipient to determine how formal or ter to the communication. Angry, or e-mail program’s spell-check function. informal etiquette should be. E-mails “flame,” mail11 escalates disputes.12 Editing is necessary because “[c]lients among colleagues sent in a series of Cut the back-and-forth. Stop often can’t tell whether your legal quick responses are different from e-mailing when an exchange, called advice is sound, but they can certainly e-mails to a potential client. The varied a “thread,” turns into a long back- tell if you made careless typos.”16 purposes of e-mails and the diver- and-forth discussion.13 It’s better to Be concise. Given the volume of sity of recipients lead to conflicting eti- discuss on the telephone or in person e-mail and the limited time to read quette rules. Many equate e-mail with any matter requiring more than three and respond, make e-mail readable. traditional correspondence. Others see replies. Long threads lead to confu- Write so that readers can read and it as a new and different way to write. sion when the discussion strays from comprehend quickly. Compose short Some authorities argue that old-fash- the original subject. Sending e-mails sentences, short paragraphs,17 and ioned “snail mail” letters are better also gives senders a sense of absolved short e-mails. To make the reader’s job when interacting with adversaries, cli- responsibility when nothing has been CONTINUED ON PAGE 56

64 | November/December 2009 | NYSBA Journal

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