The Dutch, Munsees and the Purchase of Manhattan Island

JANUARY 2015 VOL. 87 | NO. 1 JournalNEW YORK STATE BAR ASSOCIATION

The Dutch, Munsees and the Also in this Issue In re Kramer Purchase of Manhattan Island Buying, Selling a Practice – Part 2 by Paul Otto The Posthumously Conceived Child from Opening Statements – Law, Jurisprudence, and the History of Dutch New York Albert M. Rosenblatt and Julia C. Rosenblatt, eds. NEW YORK STATE BAR ASSOCIATION

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THE DUTCH, MUNSEES AND THE PURCHASE OF MANHATTAN ISLAND BY PAUL OTTO from Opening Statements – Law, Jurisprudence, and the History of Dutch New York EDITED BY ALBERT M. ROSENBLATT AND JULIA C. ROSENBLATT 10 DEPARTMENTS 5 President’s Message 8 CLE Seminar Schedule 22 In re Kramer and the Enforceability of 18 Burden of Proof Charitable Pledges BY DAVID PAUL HOROWITZ BY SPENCER L. REAMES 36 Point of View BY ADAM J. GANA AND ALEXANDER A. TRUITT 26 Buying or Selling a Small or Solo 40 Contracts Practice – Part 2 BY PETER SIVIGLIA BY NAT WASSERSTEIN 44 Legal Research BY AMY A. EMERSON 30 Aftereffects: New Legislation Addresses 48 Law Practice Management the Rights of the Posthumously BY CHAD E. BURTON Conceived Child 50 Attorney Professionalism Forum BY ANTHONY T. SELVAGGIO AND NANCY E. KLOTZ 53 New Members Welcomed 61 Index to Advertisers 61 Classified Notices 63 2014–2015 Officers 64 The Legal Writer BY GERALD LEBOVITS CARTOONS © CARTOONRESOURCE.COM

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A Mid-term Perspective

e all know that issues and and county and local bar associations. events don’t fit into neat Robert Ostertag, a former president of Wtime frames and often take the Association, played a central role on lives of their own. That is particu- in articulating the objections of many larly true for an organization as com- lawyers and bar associations against plex and far-reaching as the New York the reporting requirement, particularly State Bar Association. So, I thought as it pertained to solo and small firm that it might be useful at the midpoint practitioners. At the same time, a report of my presidency to take a snapshot of was being prepared by the President’s some of the major matters that have Committee on Access to Justice exam- Association with the pro bono report- occupied the Association at various ining the experience of other states in ing requirements. levels for the past six months and put adopting a pro bono reporting require- Over the course of four meetings these matters into context. ment. The debate and comments in that were both collegial and produc- the House of Delegate meetings were tive, this group reached agreement Mandatory Pro Bono Reporting heated, and feelings ran high. on three main areas of concern to our and Access to Justice However, the vote by the House of members: (1) reporting on pro bono During the past six months, the issue Delegates on a resolution presented by service and contributions would be of mandatory pro bono reporting has Scott Karson on behalf of the Associa- anonymous, (2) any public reporting occupied much of the time of the Asso- tion’s Executive Committee was post- of this data would be in the aggregate ciation’s Executive Committee and poned to give time for the report to be only, and (3) the reporting require- House of Delegates. The issue has cer- prepared. This report was presented ment would expand the categories of tainly caught the attention of other bar to the House of Delegates, at its June pro bono and public service to better associations and attorneys throughout 2014 Cooperstown meeting, by Judge reflect all the contributions attorneys the state as well. In Chief Judge Jona- George Lowe, William Russell and make to their communities. We also than Lippman’s February 2013 State Andrew Scherer. When I assumed the agreed that any information report- of the Judiciary address, he addressed presidency of the Association this past ed by attorneys before these changes the unmet need for legal services in the June, I asked the House of Delegates were made would be designated as State of New York and announced the to again postpone the vote to give confidential by the Office of Court requirement that attorneys report the David Miranda, the president-elect, Administration. number of pro bono hours performed and myself time to try to settle this On December 18, 2014, the Admin- and the amount of monetary contribu- matter directly with the Chief Judge. istrative Board of the Courts unani- tions made to legal service providers. I was deeply appreciative that the mously approved modifications to In June of that year, the Association’s House honored my request at a time Section 118.1 of the Rules of the Chief Executive Committee directed then- when there was tremendous pressure Administrator to conform to the rec- President David Schraver to send a to take action. ommendations of our group. By agree- letter expressing the Association’s I had met with Chief Judge ment, a committee of six persons – opposition to the requirement. Soon Lippman at his request, and we had three designated by the Chief Judge thereafter, David Schraver and I met agreed to have Chief Administrative and the other three designated by me – with Chief Judge Lippman to discuss Judge A. Gail Prudenti, Helaine Bar- has been formed to oversee the details our members’ deep concerns, including nett (Chair of the Chief Judge’s Task and implementation of the pro bono issues of privacy and fairness. In the Force on Access to Justice), David following months, the issue became the Miranda and me meet to discuss ways subject of much debate and comment of accommodating the concerns of the GLENN LAU-KEE can be reached at among the members of the Association [email protected].

NYSBA Journal | January 2015 | 5 PRESIDENT’S MESSAGE reporting requirement. I will be report- UBE could be administered in New New York law, is a significant topic for ing to the House of Delegates on this York State as early as July 2015. The discussion in the coming months. matter in future meetings. time periods for comments and imple- While this issue has been exten- mentation were too short, and at its The Judicial System and sively reported on and subject to exten- November 2014 meeting the House of Law Reform sive comment, there are two additional Delegates voted to ask Judge Lippman This year, the Association played a points I wish to make. to extend the comment period from 30 major role in the establishment of 25 First, I believe that the data that days to 90 days and to forestall imple- new Family Court judgeships. Advo- will be compiled from this reporting menting the change in July of 2015. cating for the establishment of these requirement will be useful. During my After the House of Delegates vote new positions, and their funding, was most recent presentation before the and after having met with several law the Association’s top legislative prior- House of Delegates, I spoke about how school deans who had similar con- ity for 2014. Working with a coalition the discussions regarding access to jus- cerns, Judge Lippman agreed to extend of other organizations, the Association tice and pro bono have been evolving. the time for comment to March 1, 2015. was finally successful in addressing We need data to help us determine the The Chief Judge also created a working this desperate need. most effective ways to use resources group, headed by Associate Judge of In 2015, the Association will be to address access to justice issues. Our the Court of Appeals Jenny Rivera, to advocating, in Albany and in Wash- Association has long been interested in study the bar exam proposals. Addi- ington, D.C., for funding for the state addressing these issues, through seed- tionally, Judge Lippman put off indefi- and federal court systems, as well as money grants from the New York Bar nitely the implementation of the UBE. for legal services programs. On non- Foundation, by encouraging our mem- As the working group studies this budgetary items, we will focus on bers’ thousands of hours of pro bono issue, the Association is helping gather various reforms of the criminal justice service through incentives such as our information about the UBE from the system and bills to enhance voter par- award programs, and by advocating 14 states where it is used, including ticipation. We will also be advocating for sufficient funding for legal services data on whether UBE has a disparate for a revision of the state franchise law at both the state and federal level. The impact on minority attorneys. and, in Washington, assuring counsel data will also help bar associations Our Association’s main concern is for individuals in immigration pro- throughout the state let the public that the New York bar examination ceedings and repeal of the Defense of know about all the contributions that plays a critical role in helping drive Marriage Act. attorneys make to their communities, legal education toward an empha- at so many different levels and in so sis on giving lawyers entering the New York Law on the many ways. profession the skills they will need International Scene Second, a significant outgrowth as members of the New York Bar. The course of my presidency has also of dealing with this mandatory pro A major goal of our Association is involved several international meet- bono issue has been the establishment that lawyers newly admitted to the ings and initiatives. In October, the of a stronger, more positive working bar in New York have the knowl- Association, recognized as a non-gov- relationship between this Association edge and skills necessary to practice ernmental organization to the United and the Chief Judge and the Office of law in this state. This is important Nations, and its International Section the Court Administration (OCA). This not only for prospective employers participated in a program held at the intense conversation has also strength- but also for their clients. While a United Nations Office in Vienna, Aus- ened the lines of communication new lawyer can use bridge-the-gap tria. The program was opened by the between this Association and other bar CLE programs to get oriented to the Chancellor of Austria, which I believe associations in the state. actual practice of the profession, law is the first time that an Association schools need to provide a solid foun- event was opened by a head of state, The Uniform Bar Examination dation in New York law. In an effort and we were also addressed by a judge and Legal Education to give their students a successful of the Austrian Supreme Court. We Our strengthened working relation- start, many New York law schools are grateful to the members of the ship with the Chief Judge and the formulate their curricula with an eye International Section, particularly Otto OCA was helpful in communicating toward this state’s bar examination. Wächter in Vienna, for organizing such the Association’s concerns to Chief What is tested on the bar examina- a significant and successful event. Judge Lippman when he announced, tion is, therefore, in many ways rel- Part of the program was held at in October 2014, his interest in having evant to the readiness of new attor- the United Nations offices in Vien- New York become the 15th state to neys to practice law in New York. na under the auspices of the United adopt the Uniform Bar Exam (UBE). The UBE and, in particular, the issue Nations Commission on International His announcement suggested that the of how bar applicants will be tested on CONTINUED ON PAGE 55

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PAUL OTTO, author of “Real Estate or Political Sovereignty? The Dutch, Munsees, and the Purchase of Manhattan Island,” chapter 5 in Opening State- ments, is professor of history at George Fox University, Newberg, Oregon. His research focuses on European-Native American relations in early America; he is currently examining the role of wampum in the colonial northeast. His book The Dutch-Munsee Encounter in America: The Struggle for Sovereignty in the Hudson Valley won the Hendricks Award for the best volume on colonial Dutch studies. He has been the recipient of a Mellon Fellowship and an Earhart Research Grant and is a fellow of the New Netherland Institute and the Holland Society of New York.

1010 | JJanuaryananuauaryry 2201501015 |NYN NYSBAYSBSBA JoJournaloururnanal The Dutch, Munsees, and the Purchase of Manhattan Island by Paul Otto from Opening Statements – Law, Jurisprudence, and the History of Dutch New York Albert M. Rosenblatt and Julia C. Rosenblatt, Eds. From the Introduction to Opening Statements nerve center. For that near half-century, the Dutch estab- We may call England our “mother country,” but our lished government, trade, and institutions that helped culture, political system, and jurisprudence have a more shape the future of what would become New York. varied heritage. Each state with its own settlement his- For years, the history of New York under Dutch rule tory has a unique flavor. Our nation’s lineage, and New languished in what Washington Irving called “the regions York’s in particular, has an often-overlooked Dutch of doubt and fable.” He used this phrase in his preface, component. Scholars differ as to how much of New “an author’s apology,” to the 1848 edition of his whimsi- Netherland, or Dutch New York, survived in present- cal history of New York as told by an imaginary Diedrich day institutions. Some commentators say that the het- Knickerbocker. erogeneous, commerce-oriented nature of the 40 years Irving penned his fictional history in 1809, the bicen- or so of Dutch settlement gave New York a character tennial year of Hudson’s exploration of the river so vital that persists to this day. Others contend that little, if to New Netherland. Irving never intended his writing to anything, survives. substitute for true historical scholarship, merely using the By the beginning of the 17th century, Western Europe gap in recorded history to write something entertaining. had a long-established trade relationship with the East, Indeed, he was one of the citizens who banded together from which it desired luxuries such as spices and pre- in 1804 to form the New-York Historical Society, which cious stones. In exchange, the East valued European took steps to acquire and preserve New York’s historical goods, silver, and manufactured articles. record. Ironically, his “history” plunged the Dutch epoch Europeans had few trade routes. One was across the even deeper into the shadowy realm of legend. desert and mountains to the Caspian and Black Seas; The Dutch period would have remained in Washing- another from the Arabian and Red Seas into the Indian ton Irving’s land of doubt and fable were it not for people Ocean; still another around the Cape of Good Hope. who had a passion to preserve and study documents Because these routes were long and controlled by rival from the era. Many records, letters, diaries, and the like countries, each sought alternate passageways to the East, have perished through neglect or disaster. Others have including a “Northeast passage” to Asia. been spared. The saga of the archives is an adventure The Netherlands, at the time a center of trade and story in itself. commerce, hoped to find such a route. In 1609, the Dutch . . . East India Company engaged Henry Hudson, an English- Much of the contemporary writing about New Nether- man, for the venture. He did not find the route and is best land shows the place to be rife with drunkenness, brawl- known for exploring the river that now bears his name. ing, and adultery – truly disorderly. Disorder endows Not long after Hudson’s exploration, the Dutch sent writing with the dramatic tension that makes exciting others to examine the territory. Adriaen Block explored reading, and many primary sources lead directly to the coast all the way to Cape Cod and mapped the region. this aspect of life. A significant part of New Netherland When in 1613 his ship burned near the shore of lower documents comes from court records, which by their very Manhattan, he and his crew built a new one on the spot. nature chronicle crime and conflict. Although the Dutch never found the hoped-for . . . “Northeast passage,” they found a land teeming with The recent quadricentennial of Henry Hudson’s 1609 resources to trade, especially a wealth of beavers, whose exploration has brought renewed interest in the period pelts found favor in European fashion. From 1624 through and new scholarly accounts. The recent flurry of interest 1664, the Dutch colonized and controlled a large area comes from more than the current century marker. Sev- – ”New Netherland,” including “New Amsterdam” as its eral events have brought the study of this period to light:

NYSBANYYSBBA JoJournaluru nal | JaJJanuaryanuuara y 20201501515 | 111 First, scholars have access to more primary source mate- official land deed (nor does one exist). Despite all these rial than ever before, owing to the work of the New Neth- imperfections, and in the absence of a true deed, New erland Project under the direction of Charles Gehring. Yorkers must satisfy themselves with this document, Second, the best-selling The Island at the Center of the World which they have done since it was first uncovered in by Russell Shorto has brought this facet of our history to 1844. But even if a deed did exist, New Yorkers would public attention. Examining Dutch influence on America still be left with some important questions. First, deed or is too interesting to be a once-a-century phenomenon. no deed, confusion surrounds the amount paid for Man- Many avenues of research lie before future scholars. Let hattan Island. The Schagen letter records the figure of 60 us hope they maintain a steady stream of new informa- guilders while American tradition holds that it was $24. tion and further illumination from historians. Second, it is not clear why Native Americans would sell In the present volume, a broad spectrum of emi- or transfer the island for this or any amount of money. nent scholars treat the legal heritage New Netherland Third, and most important, what did the Indians mean bequeathed to New York. This volume covers a number by “selling” the land? of issues that speak to that heritage, including concepts . . . of governance, liberty, women’s rights, and religious In the heart of the territory where New York City freedom. In many ways, those fundamental concepts and portions of New York and New Jersey would some- resonate in today’s legal culture. Not all our authors day be located, lived the Munsee people. These Native agree with each other about everything, and that is fine. Americans had lived in the region for at least hundreds Controversy advances scholarship. of years. They have also been known as Lenapes and Delawares. No term adequately describes the group, in Real Estate or Political Sovereignty? The Dutch, part because it is not fully accurate to describe them as Munsees, and the Purchase of Manhattan Island a single Indian tribe. Instead, the Munsees represented By Paul Otto a collection of villages, clans, and larger groupings One legacy of New Netherland is legend. A particularly persis- sharing a common language and cultural practices. The tent story is of Peter Minuit’s “purchase” of Manhattan from Munsees were also linguistically linked to their south- the Native Americans for $24. In the essay that follows, Paul ern and western neighbors, the Unami, who have also Otto describes relationships between the Dutch and Native been known as the Delawares or Lenni Lenape. In the Americans and debunks some of the popular myths about how 17th century, these people would find themselves the the Dutch acquired Manhattan. “hosts” of wave after wave of European “guests.” In the A.R. & J.R, eds. earliest years, native people may have welcomed these In 1626, Pieter Schagen, representative of the States visitors and the advantages a relationship with them General in the West India Company, wrote of the arrival brought in trade, but eventually they found control of in the fatherland of a ship, the Arms of Amsterdam, their territory challenged and their sovereignty in the from New Netherland. He reported news from the colo- land threatened. ny and listed the goods arriving in the Dutch Republic. Dutch colonization of New Netherland did not begin He also nonchalantly reported that the Dutch in New with settlement or land acquisitions. It began, rather, with Netherland “have purchased the Island Manhattes from a series of trading voyages to the Hudson River valley the Indians for the value of 60 guilders; ‘tis 11,000 mor- and elsewhere along the Atlantic coast. By 1611, Dutch gens in size.” A seemingly innocuous statement of fact captains plied American waters seeking to exchange about a land transfer between Native Americans and the European wares for North American furs. The Munsees Dutch, the statement is nonetheless of profound signifi- mostly welcomed these voyages and for more than 10 cance. For New Yorkers, this letter, the primary docu- years a thriving fur trade existed in lands occupied by mentation of the transfer of Manhattan Island to the Munsee Indians and labeled on Dutch maps as “Nieu hands of Europeans, serves as a kind of birth certiﬁcate Nederlandt.” Most of these trade expeditions consisted of for New York City. ships traveling the marine and riparian coasts and mak- This is the closest thing we have to a formal notice ing exchanges where they could. Certain locales became of this purchase, but it provides little of the information particularly important, such as the region where Albany we might hope for from official documents, leaving us now stands. There, in 1614, Dutch traders established an many questions. As a birth certiﬁcate, the document fails outpost, Fort Nassau, which was abandoned after 1616. to provide an exact date of the “birth,” and it does not But for the most part, in this era of trade, the Indians identify where the event took place. As documentation remained the masters of their lands. Dutch traders did for the most infamous land transfer in American history, not establish long-term outposts and apparently did not it also falls short of the mark. Besides not identifying the purchase land from the Indians. Certainly no settlers place and date of this historic transfer, it does not item- came to live there. As far as the scarce records indicate, ize the goods in the exchange or the exact identity of the this situation was mutually acceptable and beneficial to parties to the exchange. More importantly, it is not an European and Indian alike. The Indians of the Hudson

12 | January 2015 | NYSBA Journal River valley happily exchanged the products of the forest live among us, a contract being made thereof and signed for goods that they found both exotic and useful. by them in their manner, since such contracts upon other After 1621, this situation began to change. In the occasions may be very useful to the Company.” Thus, the Dutch Republic, the West India Company was cre- Company was willing to accommodate Indian claims to ated and given a monopoly of Dutch commercial activ- the land, but not, in the final analysis, to bow to those ity throughout the Atlantic world. While the West India claims. In later instructions, Verhulst was ordered to find Company’s earliest activities in New Netherland cen- a place to establish the Company headquarters that was tered mostly upon trade, the WIC had considered the “abandoned by the Indians or unoccupied,” and if he possibility of settlement almost from the beginning and could obtain “none but those that are occupied by the soon took more concrete steps in that direction. France Indians, they shall see whether they cannot, either in and England began to challenge the Dutch Republic’s return for trading-goods or by means of some amicable claims in the New World based primarily on the right of agreement, induce them to give up ownership and pos- first discovery. With the States General adding pressure session to us.” Thus, the acquisition of some Indian land to the West India Company to respond to this crisis, the would have to be accomplished, but the means would Company decided to establish a permanent settlement be dictated by concerns of fairness and justice: “without in New Netherland. The availability of several Walloon however forcing them thereto in the least or taking pos- families (Francophones from the southern Netherlands) session by craft or fraud.” willing to immigrate to New Netherland helped finalize Verhulst did not accomplish this task of purchasing their decision. a site for the administrative headquarters of the colony,

Dutch colonization of New Netherland did not begin with settlement or land acquisitions. It began, rather, with a series of trading voyages to the Hudson River valley and elsewhere along the Atlantic coast.

The result was the establishment of a settlement but in the spring of 1626, his successor, Director Peter colony in New Netherland. Thus, with the creation of the Minuit purchased Manhattan Island. In addition to Pieter West India Company and the choice to establish Euro- Schagen’s reference to the purchase cited at the beginning pean settlers in their North American territory, came a of this chapter, other records also refer to it. West India significantly different focus in Dutch attitudes toward a Company director Johannes de Laet wrote in 1630 that region that was also claimed, inhabited, and controlled there was an island at the mouth of the Hudson called by the Munsees. The West India Company was still com- “Manhattes or Manhatans Island, because this nation of mitted to an emphasis on the fur trade and no plans were Indians happened to possess the same, and by them it initially laid for large-scale settlement as was happening had been sold to the Company.” In 1633 he also stated in Virginia and would later occur in Massachusetts Bay. that “our people have bought from [the Manathans] the But the presence of the Company nevertheless affected island separated from the rest of the land by the Hellgate, Dutch-Indian affairs in a number of ways. Because the and have there laid the foundations of a fort, and of a West India Company needed to secure a solid legal claim town called New Amsterdam.” to the territory and defend it against European competi- Tradition holds that the island was purchased with tors, it purchased land from the Indians and established “glittering beads and baubles,” but the actual nature and settlements there. Furthermore, land exchanges signified content of the goods traded to the Indians for the island presumed Dutch sovereignty over the region and its is unknown. It can be surmised that the Indians accepted inhabitants. the typical trade items. When the Dutch purchased Staten In 1625, the Company instructed Director Willem Island a few years later, they paid the Indians with “Duf- Verhulst to acquire land from the Indians on which to fels, Kittles, Axes, Hoes, Wampum, Drilling Awls, Jews establish a headquarters for the colony. Their instructions harps, and diverse other small wares.” The value of the demonstrate the Company’s approach to the native peo- goods – 60 guilders – is documented, but here, too, tradi- ple – apparently respecting their indigenous rights on the tion is misleading. Most Americans who have heard the one hand, but also to some degree presuming Dutch sov- price paid for Manhattan Island cite the figure of $24. ereignty over the region. In acquiring their land, the Indi- This figure appeared in 1846 when E. B. O’Callaghan, ans were not to “be driven away by force or threats, but who had access to the recently discovered Schagen let- by good words be persuaded to leave, or be given some- ter, published his History of New Netherland. It was there thing therefor to their satisfaction, or else be allowed to that O’Callaghan introduced the figure of $24 by using

NYSBA Journal | January 2015 | 13 current rates of conversion. Since that time, the story of tant in native demand for certain products. Axes and Manhattan Island being sold for $24 in trade goods has hoes, for example, quickly became employed by Indians been retold and republished many, many times, leaving in place of native stone tools even though one oral tra- the original Dutch amount of 60 guilders lost in transla- dition repeated by the Indians in the 18th century indi- tion, as it were. cates that their forebears first wore axeheads received But the value of the guilder or dollar in the 19th cen- from Europeans around their necks as tokens of power. tury tells us little about the actual price the Dutch paid in For wampum producers, Indians who crafted the shell 1626. Even to calculate the value in dollars today, given of the coastal whelk into strings of beads with signifi- inflation, of 60 17th-century guilders misses the point. cant social and religious power, the iron drills and awls Sixty guilders was not a large sum at the time, but nei- they received greatly enhanced their manufacture of ther was it minuscule. According to historian A. Th. van this vital artifact. Duffels – a coarse cloth – had become Deursen, it equaled three or four months’ wages for an an important item of trade in the 1620s. The Munsees average artisan in the province of Holland. . . . Sixty guil- began to substitute duffels for deerskins, using it for ders was also the amount the Company paid a colonist clothing during the day and for blankets at night. The (and presumably an Indian as well) for 30 beaver skins or native people preferred it in dark colors such as blue, 12 fathoms of wampum. grey, and black, possibly because they believed these To the Dutch, the land was certainly valuable at the would provide them better camouflage while hunting time (it would be anachronistic to consider its value today in the woods, but also likely because they attached as the commercial capital of the world). The 14,000 acre dark colors to sources of power. Demand for duffels island became the Company’s headquarters and the loca- also indicates the Indians’ growing dependency upon tion of the Company’s farms and agricultural endeavors. European goods. As the Munsees increased the time Domine Michaëlius reported that “this island is the key they spent harvesting furs or producing wampum, they and principal stronghold of the country, and needs to be would have less time to produce basic necessities such settled first, as is already done.” In fact, since controlling as clothing, forcing them to acquire these items from the Manhattan Island meant controlling the Hudson River, Dutch. [Colonial secretary Isaac] de Rasière made clear which reached deep into fur country, the island’s value the importance of duffels to the Indians when he sug- can be understood in terms of the value of the fur trade. gested to the Company directors that if they could “sup- It is perhaps not without coincidence that Schagen’s letter ply me continually with duffels, I shall know how to get reporting the purchase of Manhattan Island also reports wampum and stock Fort Orange.” de Rasière promised the importation of 45,000 guilders worth of furs from the directors 10,000 furs if they could provide him with New Netherland. It is possible that the Dutch attraction sufficient duffels. The Munsees’ northern neighbors, the to Manhattan Island was also connected to the trade Mohawks, prized it so highly that they announced they in wampum. The Dutch had early on discovered that should not bother trading with the Dutch if they could wampum, or sewant as it was known among the Indians not get it. It was so crucial, De Rasiere pointed out, that of Manhattan and vicinity, was highly valued by the lro- without it they might lose the trade. “Why should we quoians and other inland tribes. These peoples exchanged go hunting?” the Mohawks asked. “Half the time you various goods to coastal wampum makers for the beads. have no cloth.” Thus, the goods offered by the Dutch Although the heart of wampum production lay in eastern for Manhattan Island satisfied important Munsee needs. Long Island, it was manufactured throughout New York’s The transfer of Manhattan Island and other territories coastal regions. Whatever the case may have been regard- from the Munsees to the Dutch signified a great deal ing wampum, the Dutch certainly recognized at the time about the relationship between them. In the first place, that they had purchased the Indians’ land for a very low they followed a formal protocol when conducting land price, for Domine Michaëlius also noted, presumably refer- transactions. Company regulations required Dutch offi- ring to the purchase of Manhattan Island, that “for a small cials to preside over agreements between Europeans and sum of money we can buy from them a large quantity of Indians and to create legal deeds. As historian Patricia land,” and elsewhere noted that there is land “which can Seed has shown, this reflected a long-standing Dutch be bought from the savages for a trifle.” tradition in which property conveyances took place From the Indians’ perspective, 60 guilders of trade before a district judge. Consequently, the native repre- goods was of enormous value to them. At the first, the sentatives were obligated to appear before the council at Munsees may have valued European goods because Fort Amsterdam for land sales. When circumstances pre- they assigned spiritual or ceremonial power to items vented them from doing so, such as when the Unamis on handled by those they animistically perceived as “other- Delaware Bay sold land, officials from the fort journeyed than-human.” But within a relatively short amount of to the Indians’ territory. The Indians were more than time, this perception would have passed. While the happy to oblige such formalities, since they too regarded exchange of goods still functioned in a socially cohesive these exchanges as significant affairs. Those who sold the way, the utilitarian function of the goods became impor- land were usually tribal or village leaders or some other

14 | January 2015 | NYSBA Journal group representatives. For example, on July 12, 1630, ing, fishing, agriculture, and habitation. When Indian Arromeauw, Tekwappo, and Sackwomeck, “co-owners leaders signed agreements “selling” their land, they were of the land named Hobocanhackingh,” according to one allowing for its joint use and occupancy by the Dutch Dutch deed, appeared before the director and his coun- and their own people. They did not envision a permanent cil when they sold a tract of land to Michael Pauw. The transfer of land to the Dutch. For example, when Indians next month, Waerhinnis Couwee (Wieromies), a minor of Long Island sold a sizable portion of the island in 1639, Hackensack sachem, along with Krahorat, Tamekap, they reserved the right to remain upon the land. While Tetemakwemama, Siearewach, Sackwewew, Wissipoock, other deeds did not always specify such rights, it is clear and Saheinsios also presented themselves to [Director from Munsee actions that they must have had similar Wouter] van Twiller and his council in order to seal intentions at other times. The Indians who sold Manhat- the transfer of Staten Island to Michael Pauw. Similar tan Island continued to live there, indicating that they transactions between Munsee leaders and Dutch officials assumed that they still retained possession of the land, occurred through the remainder of this period. not to mention sovereignty over it. Similarly, Munsee people also remained on Staten Island after selling it, and over the years, resold it several times. Furthermore, land transfers in the Munsees’ perspective must be understood in terms of the Indians’ emphasis upon social cohesion. In the perspective of the Munsees, as with so many other native people of the northeastern woodlands, maintaining social balance was of utmost importance. Establishing and continuing relationships held a greater priority than amassing wealth, but such relationship building usually included the exchange of goods. Colonial secretary de Rasière understood that the Indians always embellished trade with considerable ceremony and was careful to maintain it. “These people must . . . be kept on friendly terms by kindness and occasional small gifts,” he wrote, and “one must be familiar with them and allow them to think that Such formality in conducting land sales indicated one trusts them fully.” When a delegation of “thirty or that neither group saw the transaction as the ordinary forty” Indians presented de Rasière “with ten beavers,” exchange of land from one person or group of persons to he responded by giving them “in return a fathom of another. Dutchmen could not simply move to New Neth- duffel-cloth and a small quantity of beads, two hatch- erland and purchase a tract of land from its indigenous ets, and a few other things.” De Rasière noted that this owners. This was due, on the Dutch side, to West India “was done reciprocally in token of sworn friendship.” Company recognition of Indian occupation of the land Transferring land, including the exchange of goods and (remember Company dictates not to force “them thereto attendant ceremonies, was a means to build and rein- in the least or [take] possession by craft or fraud”), and force social relations. The Munsees saw the Dutch as the Dutch penchant for documenting such transactions. more than just trading partners – they were allies and They insisted that colonial officials negotiate formal trea- powerful neighbors with whom it was good to establish ties ceding property rights to the Dutch. Therefore, indi- and maintain strong ties. vidual Dutchmen could not purchase land directly from Moreover, land transfers served other purposes to the Indians. The initial transfer of land was restricted to the Munsees and did not reflect the natives’ inten- negotiated treaties between the West India Company and tions to permanently alienate the land from themselves. Indian representatives. As the Indians’ population declined and their subsis- Munsees who signed documents ceding territory to tence shifted from wide-ranging hunting to more inten- the Dutch also viewed the transactions as carrying con- sive farming and wampum production, large hunting siderable consequence. Like Dutch officials, Indian lead- areas became less valuable. In the sachems’ minds, the ers represented their people; any changes regarding their exchange of land for trade goods seemed reasonable. people’s land had to be endorsed by them. However, the Such an exchange would also secure an alliance with the Indians’ view of land ownership or sovereignty differed Dutch who would live among them and could help the radically from that of the Dutch, and they initially under- Munsees defend themselves against their enemies. In stood these land transactions differently than did the fact, the same Indians on Long Island who reserved the Europeans. First, the Munsees did not recognize personal right of occupancy in their deed of land in 1639, gained ownership of any particular tract of land. As a group, from the Dutch an agreement to protect them against their band or village used different territories for hunt- their enemies. This pattern was not unusual for the

NYSBA Journal | January 2015 | 15 Munsees or other Indian groups. As populations would Walloons in 1624 to “take especial care, whether in trad- increase or decrease for whatever reasons, native people ing or in other matters, faithfully to fulfill their promises would expand or contract their settlements and tempo- to the Indians or other neighbors and not to give them rarily transfer unused land in the process. As population any offense without cause as regards their persons, wives, shifts again took place, land might be transferred back or property, on pain of being rigorously punished there- to the original occupants. In no case were the transfers for.” The following year, Director Verhulst was similarly considered permanent since Indian neighbors tended to instructed to “see that no one do the Indians any harm or recognize that possession or occupation of a territory was violence, deceive, mock, or contemn them in any way, but dependent upon the good graces of the group who had that in addition to good treatment they be shown honesty, earlier established sovereignty over the land. Also, with faithfulness, and sincerity in all contracts, dealings, and economic changes brought by the presence of the Dutch, intercourse, without being deceived by shortage of mea- the Munsees’ growing dependency upon the Dutch may sure, weight, or number, and that throughout friendly have compelled them to sell their lands, especially if they relations with them be maintained.” believed that doing so would ensure them continued A second set of instructions to Verhulst a few months access to European goods. later provides a better indication of the relationship which the directors believed should exist between their colony and the Indians who lived within its boundaries. While on the one hand expecting justice accorded to their own In selling Manhattan people, the Company apparently respected tribal authority. In case any settler “suffer violence or be wronged by Island and other properties, any Indian or native either in his person or with regard to the property entrusted to him, they shall notify the the Munsees did not intend tribe to whom such Indian belongs of the wrong done and the person who committed it, demanding that he to permanently transfer be punished therefor and that our people be notified of the punishment.” Ultimately, though, the Dutch reserved their land to the Dutch. final political authority for themselves. . . . Instead, they granted the In selling Manhattan Island and other properties, the Munsees did not intend to permanently transfer their Dutch the privilege of shar- land to the Dutch. Instead, they granted the Dutch the privilege of sharing the land with them. The Munsees ing the land with them. could not foresee the future, however. What they did not anticipate was that the Dutch presence corresponded to a conflict of claims over control of the whole region. But the exchange of land led to unpredictable changes From the moment that the West India Company estab- in Native American relations with the Dutch. While the lished Europeans settlements and sought to purchase Munsees did not knowingly relinquish their permanent land from the Indians, the Munsee people would strug- rights to the land when they sold it, they soon discovered gle to maintain their own autonomy while increasingly that they had surrendered permanent control over the being forced to recognize Dutch control. Ultimately, the territory, along with their political sovereignty. Indeed, importance of the selling of Manhattan had more to do Dutch colonization brought some presumption that the with the Indians’ loss of sovereignty in the long run than Dutch were extending their sovereignty over all the lands their loss of land in the short run. Neither was intended claimed under the name of “New Netherland.” The Com- by the Munsee people. However, after decades of con- pany regulations for the colony that most clearly related to tact with Europeans, the Munsees experienced growing the Indians were ambiguous at times and did not clearly dependency upon European goods and suffered increas- define the relationship of the Indians to the colony. On ing population losses through disease and warfare. the whole, however, the regulations indicate that the The effects wrought upon Munsee society as a result West India Company claimed some political sovereignty of Dutch colonization made the temporary transfer of over the indigenous inhabitants of the region, but also Manhattan Island and other Munsee lands a permanent respected some degree of native autonomy for the sake of one. The Munsees could not have foreseen the perma- maintaining a successful trade relationship. These instruc- nent loss of their lands to the Dutch. And if the Dutch tions included guidelines for Dutch interaction with their could have imagined the eventual loss of that same land native hosts and required both settlers and colonial admin- to the English, none of them could have anticipated that istrators to treat the Indians fairly and maintain peaceful Manhattan Island would become the metropolis that interaction. The Amsterdam chamber commanded the emerged in the 19th and 20th centuries. ■

16 | January 2015 | NYSBA Journal Bibliography

Portions of chapter 5 in Opening Statements first Charles T. Gehring, William A. Starna, and William appeared as part of chapter 3. “Trade and Settlement, N. Fenton, “The Tawagonshi Treaty of 1613: The Final 1624–1638,” in Paul Otto, The Dutch Munsee Encounter Chapter,” New York History 68, no. 4 (October 1987). in America: The Struggle for Sovereignty in the Hudson Robert S. Grumet, “The Selling of Lenapehoking,” Valley (New York: Berghahn Books, 2006) and are used Bulletin, Archaeological Society of New Jersey 44 (1989). here by permission of the author and the publisher. Robert S. Grumet, “‘We Are Not So Great Fools’: Van Cleaf Bachman, “Peltries or Plantations: The Changes in Upper Delawaran Socio-Political Life, 1630– Economic Polities cf the Dutch West India Company in 1758” (PhD diss., Rutgers, The State University of New New Netherland, 1623–1639,” Johns Hopkins University Jersey, 1979). Studies in Historical and Political Science, 87th ser., no. 2 (Baltimore: Johns Hopkins University Press, 1969). “Instructions for Director Willem Verhulst,” appeared in Documents Relating to New Netherland, 1624–1626, in Alfred Cave, “The Pequot War,” in Native Americans the Henry E. Huntington Library, ed. and trans. A. J. Evan of the Northeast: Culture, History, and the Contemporary, Laer (San Marino: Henry E. Huntington Library and Art ed. Cohn G. Calloway and Barry O’Connell (Amherst: Gallery, 1924). University of Massachusetts Press, 1996). Jaap Jacobs, “Soldiers of the Company: The Military William Cronon, Changes in the Land: Indians, Personnel of the West India Company in New Netherland,” Colonists, and the Ecology of New England (New York: in Jacob Leisler’s, Atlantic World in the Later Seventeenth Hill and Wang, 1983). Century. Essays on Religion, Militia Trade, and Networks Johannes de Laet, “New World,” in Narratives of New by Jaap Jacobs, Claudia Schnurmann, David W. Voorhees, Netherland, 1609–1664, ed. J. Franklin Jameson (New and Hermann Wellenreuther, ed. Herman Wellenreuther York: Charles Scribner’s Sons, 1909). (Miinster: LIT Verlag, 2009). “De Nieu Nederlanse Marcurius,” 25, no. 4 (Dec. 2009), E. B. O’Callaghan, History of New Netherland; or, New http://www.nnp.org/nni/Marcurius/marc25-4.pdf. York under the Dutch (New York: D. Appleton, 1846). Margriet de Roever, “Merchandises for New Netherland: Paul Otto, “Henry Hudson, the Munsees, and the A Look at Dutch Articles for Barter with the Native Wampum Revolution,” in Henry Hudson, New Netherland, American Population,” in One Man’s Trash is Another and Atlantic History, ed. Jaap Jacobs and Lou Roper, Man’s Treasure: The Metamorphosis of the European forthcoming. Utensil in the New World, ed. Alexandra van Dongen Oliver Rink, Holland on the Hudson: An Economic (Rotterdam: Museum Boymans-Van Beunigen, 1995). and Social History of Dutch New York (Ithaca: Cornell Documents Relative to the Colonial History of New University Press; and Cooperstown: New York State York: Procured in Holland, England, and France, ed. E. B. Historical Association, 1986). O’Callaghan, Vol 1, Holland Documents: 1–8, 1603–1656 Patricia Seed, Ceremonies of Possession in Europe’s (Albany: Weed, Parsons and Company, 1856). Conquest of the New World, 1492-1640 (New York: Peter Francis Jr., “The Beads That Did Not Buy Cambridge University Press, 1995). Manhattan Island,” New York History 67, no. 1 (Jan. 1986). Adriaen van der Donck, A Description of New Charles T. Gehring, “Dutch Colonial Manuscripts,” de Netherland, ed. Charles T Gehring and Wilham A. Starna, Halve Maen 54, no. 3 (Fall-Winter 1979). trans. Diederik Willem Goedhuys (Lincoln: University of Nebraska Press, 2008). Charles T. Gehring, “New York’s Dutch Records: A Historiographical Note – Updated,” The Hudson River Christine W. Ward, “The New York State Archives – 25 Valley Review 25, no. 2 (Spring 2009). Years Old This Year,” New York Archives 3, no. 2 (Fall 2003). Charles T. Gehring, “Peter Minuit’s Purchase of Manhattan Island – New Evidence,” de Halve Maen 55, Charles A. Weslager, “Did Minuit Buy Manhattan Island no. 1 (Spring 1980). from the Indians?,” de Halve Maen 43, no. 3 (Oct. 1968). Charles T. Gehring, trans. and ed., Land Papers, NYHM, vols. GG, HH, and II (Baltimore: Genealogical Publishing Co., 1980).

NYSBA Journal | January 2015 | 17 BURDEN OF PROOF BY DAVID PAUL HOROWITZ

DAVID PAUL HOROWITZ ([email protected]) has represented plaintiffs in personal injury cases for more than 25 years and is “of counsel” to Ressler & Ressler in New York City. He is the author of Bender’s New York Evidence and New York Civil Disclosure (LexisNexis), as well as the 2008 and forthcoming 2014 Supplements to Fisch on New York Evidence (Lond Publications). Mr. Horowitz teaches inter alia, New York Practice at Columbia Law School and Brooklyn Law School. He serves on the Office of Court Administration’s Civil Practice Advisory Committee, as Reporter to the New York Pattern Jury Instruction (P.J.I.) Committee, and is a frequent lecturer and writer on these subjects. “You Better Object . . . Now!”

Introduction Rivera defendant’s expert, Dr. Marc Sil- So many critical litigation decisions Rivera was a medical malpractice action berman, in which he asserted that often come down to a careful, sci- for the wrongful death of Wilbur Rodri- the cause of the decedent’s death entific, and systematic analysis of guez.3 Mr. Rodriguez, age 44, arrived at was a sudden, unexpected cardiac . . . your gut. More specifically, what Montefiore Medical Center’s emergen- arrhythmia. Plaintiff’s in limine your gut tells you is the best course cy room with respiratory distress at 15 application during trial to pre- of action in an area where there minutes before midnight, was admitted clude Dr. Silberman’s testimony is not an absolutely unambiguous with a working diagnosis of pneumo- was properly denied as untimely. statute, rule of court, or decision to nia, and died in the hospital between Plaintiff’s argument at trial for guide you. How often does this hap- 4:00 and 4:40 early the next morning.4 precluding Dr. Silberman’s tes- pen? Ask any trial attorney, and the At trial, the jury held for the plaintiff, timony was based on the lack of answer is bound to be, “a lot.” finding the hospital liable for fail- specificity of defendant’s CPLR One area of decision-making ing to place the decedent in a 3101(d) statement. The statement where the use of oracles, voodoo ward where his vital signs could recited, with regard to the causa- dolls, and Ouija boards is particu- be continuously monitored, and tion of the decedent’s death, that larly prevalent is the exchange of award[ed] plaintiff $40,000 for defendant’s expert would “testify experts in New York state courts. past economic loss and $680,000 as to the possible causes of the The timing and adequacy of expert for future economic loss over 17 decedent’s injuries and contribut- exchanges, in my experience, pro- years, and $0 for the decedent’s ing factors . . . [and] on the issue duces greater anxiety, among even conscious pain and suffering.5 of proximate causation”; also the most seasoned litigators, than included in its formulaic recita- any other strategic aspect in a case. Following the verdict: tion was the assertion that “the Much ink, including my own, has Both parties moved to set aside grounds for the expert’s opinion been spilled on this topic. the verdict. Supreme Court denied will be said expert’s knowledge Just when to make a motion plaintiff’s motion to strike from the and experience . . . and [the] trial where an expert exchange is late, record all testimony that the dece- testimony.” or inadequate, or both, is particu- dent’s death was caused by a sud- CPLR 3101(d)(1) requires expert larly vexing. There is no statute or den cardiac event and set aside the disclosure, “in reasonable detail,” rule that addresses the issue. Case award of $0 for the decedent’s pain of “the substance of the facts and law does not offer concrete guid- and suffering, or for a new trial opinions on which each expert ance. And the vehicle to make an on the issue of the decedent’s pain is expected to testify,” in order application to the court to preclude and suffering. The court granted in to provide the plaintiff with the or limit an expert’s testimony, the part defendant’s motion to set aside defendant’s theories of the case motion in limine,1 is one of the least the award by reducing the jury in advance of trial. Here, upon understood tools in the lawyer’s award for loss of future household receipt of this 3101(d) statement, toolbox. So, because it offers guid- services from $680,000 to $340,000. the only objection that plain- ance, albeit somewhat harsh, last Both sides appeal from this order.6 tiff voiced was that the expert’s month’s First Department decision qualifications failed to include in Rivera v. Montefiore Medical Cen- The First Department affirmed: the dates of his residency, which ter2 warrants the attention of any We reject plaintiff’s challenge deficiency defendant then cured. lawyer whose practice involves the to the aspect of the order that Plaintiff neither rejected the docu- use of experts. declined to strike the testimony of ment nor made any objection to

18 | January 2015 | NYSBA Journal the lack of specificity regarding the left ventricular hypertrophy to the lack of specificity in defen- the cause of death. found at autopsy, there was a pos- dant’s expert disclosure statement Having failed to timely object to sibility that the decedent’s death regarding the cause of the decedent’s the lack of specificity in defen- occurred as a result of a sudden death”? There is none cited. What is dant’s expert disclosure statement and unexpected cardiac event. the authority for the holding that the regarding the cause of the dece- Not only did Dr. Silberman’s prop- plaintiff waived the right to object dent’s death, plaintiff was not jus- erly admitted testimony comport to the expert’s testimony because, tified in assuming that the defense with plaintiff’s experts’ testimony “upon receipt of this 3101(d) state- expert’s testimony would comport on cross-examination, it comport- ment, the only objection that plaintiff with the conclusion reached by ed with evidence showing that the voiced was that the expert’s quali- the autopsy report, and plaintiff decedent was not in any respira- fications failed to include the dates cannot now be heard to complain tory distress the last time he was of his residency . . . and [p]laintiff that defendant’s expert improp- seen before the 40-minute window neither rejected the document nor erly espoused some other theory of his death; that he had a call but- made any objection to the lack of of causation for which there was ton, but never used it, suggesting specificity regarding the cause of support in the evidence.7 he died suddenly; and that he death”?11 There is none cited. Finally, The First Department made had a heart abnormality and other what is the authority for the holding quick work of the plaintiff’s other ailments that made him more sus- that the plaintiff waived objection by arguments concerning the defense ceptible to sudden cardiac arrest. failing to reject the exchange? There expert’s testimony: All the foregoing sufficiently sup- is none cited.12 ports the jury’s rejection of plain- Plaintiff now argues that the tes- The only case cited by the tiff’s pain and suffering claim.8 timony that the decedent’s death First Department is Chapman v. was caused by a sudden, unex- Motions in Limine State,13 where the Third Depart- pected cardiac event should be Motions in limine (“on or at the ment reversed a trial court’s deci- stricken because it came as a sur- threshold” or “in the beginning”) sion permitting an expert to tes- prise. However, after plaintiff’s are requests that a court rule on an tify where the CPLR 3101(d)(1)(i) own experts acknowledged on evidentiary objection prior to the exchange “[was] wholly inade- cross-examination that such a sud- time when a trial objection is pos- quate and, in fact, ‘so general and den cardiac event was a possibility sible, which is at the time evidence nonspecific that the [State] has not based on the decedent’s medical is actually offered by a party at the been enlightened to any apprecia- history and condition, defendant’s trial. While there is no specific statu- ble degree about the content of this expert appropriately elaborated tory basis for a motion in limine, the expert’s anticipated testimony.’”14 on that theory of causation, and court’s inherent power to admit or Interestingly, citing CPLR 3126, the there is no valid basis on which exclude evidence provides the basis Third Department remanded the to strike either side’s experts’ tes- for the motion.9 While motions in case to the trial court to determine timony as to the decedent’s death limine are often made prior to the the appropriate relief: from a sudden cardiac event. The decedent’s emergency room attending physician, Dr. Mukherji, testified that based on his review So many critical litigation of the medical record, he believed the decedent died of a cardiac decisions often come down to a arrest that was not preceded by respiratory failure, since the dece- careful, scientific, and systematic dent’s vital signs would have pro- gressively worsened throughout analysis of . . . your gut. the night had he died of respiratory failure. And, while plaintiff’s internal medicine and cardiology start of the trial, they may be made Because the conclusion that expert, Dr. Mark Schiffer, offered at any point prior to the time the claimants failed to comply with the opinion that the decedent’s evidence is offered, when the court the State’s discovery notice does death from pneumonia was pro- has had an opportunity to rule on the not require the unconditional ceeded by 5 to 10 minutes of a admissibility of the evidence.10 grant of the State’s preclusion painful struggle to breathe, he So what is the authority cited for motion, we remit the matter to acknowledged on cross-examina- the First Department’s holding that the Court of Claims for determi- tion that, particularly in view of the plaintiff “failed to timely object nation thereof.15

NYSBA Journal | January 2015 | 19 As for statutory authority, the tion had been made to a different decision is, as of this writing, only First Department cites, along with portion of the expert economist’s five days old, I have not had much Chapman, CPLR 3101(d)(1),16 regard- CPLR 3101(d)(1)(i) exchange?18 time to reflect. But if I have to make ing the requirement to provide “rea- Would the earlier objection have a decision about what to do upon sonable notice” of the substance of been considered a waiver of any receipt of an inadequate expert the expert’s facts and opinions. other objections? exchange, I will listen very carefully to what my gut tells me. ■ Conclusion Rivera begs the question as to 1. Motions in limine were the subject of a Bur- den of Proof column, In the Beginning, Motions Just when whether the plaintiff was, in fact, In Limine, N.Y. St. B.J. (May 2005), p. 16. penalized for making an initial 2. 2014 N.Y. Slip Op. 08469 (1st Dep’t Dec. 4, to make a objection (presumably shortly after 2014). receipt) to the defendant’s expert 3. Id. motion where exchange. Certainly the rule cannot 4. Id. be that there is only one opportu- 5. Id. an expert nity to object to an expert exchange, 6. Id. and anything not included in the 7. Id. (citation omitted). exchange is first objection is deemed waived. 8. Id. The adequacy of the exchange, as 9. See, e.g., People v. Michael M., 162 Misc. 2d late, or opposed to the failure to provide 803 (Sup. Ct., Kings Co. 1994). expert credentials, is something that 10. See, e.g., Coopersmith v. Gold, 223 A.D.2d 572 inadequate, may not be apparent until some (2d Dep’t 1996), aff’d, 89 N.Y.2d 957 (1997). time after receipt, and perhaps not 11. 2014 N.Y. Slip Op. 08469. or both, is until the expert is on the stand tes- 12. CPLR 2101(f) is the only statute I am aware tifying.19 How long could the plain- of requiring rejection of a paper, and only applies to form defects: particularly tiff have safely waited before serv- Defects in form; waiver. A defect in ing an objection or serving a sub- the form of a paper, if a substantial vexing. sequent objection? Would rejection right of a party is not prejudiced, of the defendant’s expert exchange, shall be disregarded by the court, and leave to correct shall be freely given. in and of itself, without a detailed The party on whom a paper is served There is no CPLR rule on motions explanation of why the exchange shall be deemed to have waived objec- in limine. There is no provision in the was being rejected, be enough? tion to any defect in form unless, within fifteen days after the receipt general provisions of the Uniform So what does a practitioner do in thereof, the party on whom the paper Rules for Trial Courts governing, or the face of Rivera’s holding that the is served returns the paper to the even discussing, motions in limine. plaintiff’s objections were not time- party serving it with a statement of particular objections. In fact, the only Uniform Rule I ly, and that objecting to one inad- 13. 189 A.D.2d 1075 (3d Dep’t 1993). am aware of discussing motions in equate aspect of the defendant’s limine appears in the Commercial exchange,20 and no others, waived 14. Id. at 1075 (citation omitted). Division Rules: subsequent objection to other inad- 15. Id. (citation omitted). Rule 27. Motions in Limine. The equacies in the exchange? 16. 2014 N.Y. Slip Op. 08469. parties shall make all motions Upon receipt, object to the 17. 22 N.Y.C.R.R. § 202.70. in limine no later than ten days expert exchange (making certain to 18. These are valid questions notwithstanding the additional expert disclosure set forth in the prior to the scheduled pre-trial object to each and every potential Commercial Division Rules inasmuch as those conference date, and the motions defect and/or inadequacy in the procedures cannot be considered mandatory. See shall be returnable on the date of exchange)? Burden of Proof – “Heaven?” Part 2, N.Y. St. B.J. (July-Aug. 2014), p. 18. the pre-trial conference, unless Upon receipt, reject the expert 19. Presumably, the inadequacy of the otherwise directed by the court.17 exchange? exchange was patent upon receipt. So, had this motion in limine Upon receipt, make a motion in 20. Correctly, as it turns out, since the defen- 21 been made in a trial court in the limine? dant “cured” the defect. Commercial Division at least 10 All three would be consistent 21. Such a motion would, since it pertains to days prior to the pre-trial confer- with Rivera’s holdings, and doing disclosure, require a good faith affidavit pursu- ence, seeking to preclude an expert some combination of the three ant to 22 N.Y.C.R.R. § 202.7. economist rather than an expert actions, soon after receipt of an physician, would the motion have expert exchange, would be the saf- been untimely, even if a prior objec- est course. As for me, since the D 20 | January 2015 | NYSBA Journal O a Introducing the NYSBA Periodicals App

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DOWNLOAD TODAY! Once you have downloaded the app, use your member login and password to access this exclusive member benefit. Never miss an issue ever again! In re Kramer and the Enforceability of Charitable Pledges By Spencer L. Reames

aypersons and lawyers alike often take the enforce- Chautauqua County Bank of Jamestown, recognized that ability of charitable subscriptions or pledges as a “[v]ery likely, conceptions of public policy have shaped, Lgiven. This assumption is well grounded in the more or less subconsciously, the rulings thus made,”6 as case law in New York, where the weight of legal prec- judges subscribed to the belief that defenses against the edent is so firmly tilted toward charities that it is rare enforcement of charitable pledges constituted breaches of to find a case in which a charity cannot make a case faith toward the public. With this in mind, Judge Cardozo for enforcement.1 The recent Kings County Surrogate’s declared that decisions in favor of pledge enforcement Court decision in In re Kramer,2 however, is one such “which are supported by so many considerations of pub- case where a charity did not prevail. Kramer serves as lic policy and reason” would not be overruled.7 a useful reminder that the enforcement of charitable Allegheny laid the foundation for the principles of pledges should not be taken for granted and, despite the charitable pledge enforcement as they exist today. The generally broad judicial policy favoring charities, a char- Court of Appeals further ratified and strengthened this ity must demonstrate some adherence to the established public policy in cases such as I. & I. Holding Corp. v. legal framework in order to justify enforceability. Gainsburg8 and Woodmere Academy v. Steinberg.9 Judicial support of charitable pledges was important because Enforcement as a Matter of Public Policy “[t]he philanthropic work carried on by organized chari- Historically, the characterization and enforcement of ties, made possible through voluntary subscriptions, is charitable pledges in New York was unsettled and a a distinguishing and distinguished feature of our free “prolific source of controversy.”3 Courts struggled to society. It is a demonstration of the human sympathy, reconcile promises, which were clearly motivated by mercy, consideration and good will borne by those more the principles of gift-giving, with the strict elements of fortunately endowed towards their less fortunate fellow- contract, principally the requirement of consideration.4 men.”10 It was unlikely that the proponent of enforcement could A major step toward this judicial support came from show the requisite bargained-for exchange, or quid pro a determination that parol evidence, or evidence out- quo, that contract principles demand, and consequently side the subscription agreement or pledge itself, would in early decisions subscription agreements were deemed be admissible to prove consideration by the charitable void and unenforceable.5 donee.11 Thus, a charity seeking enforcement may bring Over time, however, decisions shifted toward the ben- forward useful evidence for the purpose of demonstrat- efit of charities, and defenses grounded upon lack of con- ing consideration and to elaborate upon the transactions sideration came to be disfavored. Judge Cardozo, writing or acts surrounding the pledge.12 for the Court of Appeals in Allegheny College v. National

SPENCER L. REAMES is an associate in the trusts and estates litigation department at Farrell Fritz, P.C. in Uniondale, New York. A different version of this article appeared in the Fall 2014 issue of the Trusts and Estates Law Section Newsletter, a publication of the Trusts and Estates Law Section of the New York State Bar Association.

22 | January 2015 | NYSBA Journal Weighing this admissible parol evidence, courts have Promissory Estoppel utilized three legal theories to sustain the enforceability The promissory estoppel theory is based upon an equi- of charitable pledges: the creation of a bilateral contract, table remedy rather than contract theory; it supports the completion of a unilateral contract, and the equitable enforcement of a charitable pledge where the charity remedy of promissory estoppel. has taken action in direct reliance on the promise of the donor. In these cases, the charity has incurred liability to Bilateral Contract its detriment and would suffer damages were the pledge The bilateral contract theory is based upon the traditional not enforced. As noted in Allegheny College, the promis- contract principles of a mutual exchange. In such a case, sory estoppel doctrine was invoked by courts as a work- the donor is found to have given the pledge in return for around to the failure of consideration defense before the something of value from the charity. This usually arises Court of Appeals made clear that charitable subscriptions in the case where the donor seeks a memorialization or would generally be enforced as a matter of public poli- remembrance as a condition of the pledge in the form cy.18 Based upon I. & I. Holding, it seems that an appeal of a named building, endowed scholarship, or the like. to promissory estoppel should only be utilized as a final The key difference from a non-charitable contract is that resort when a charity cannot justify enforcement under a the charity’s return promise is often not spelled out but, bilateral or unilateral contract theory.19 rather, is implied by the charity’s very acceptance of the conditional pledge. Bilateral contract cases are typified by In re Kramer the Court of Appeals case Allegheny College in which the In light of the favorable history and case law preceding donor pledged money to establish a memorial scholar- Kramer, where did the charity go wrong? In short, the ship in her name. The Court found that, by accepting the Kings County Surrogate’s Court found that the charity pledge, and an advance payment on account, the college had done next to nothing in reliance upon the pledge, had made a return promise and created an obligation to and, thus, consideration could not be found under any of the donor, albeit implied. This constituted consideration the three rationales. and created an enforceable contract.13 Kramer involved a motion by a charity, Educational Institute Oholei Torah-Oholei Menachem, for summary Unilateral Contract judgment dismissing objections to its petition to deter- Perhaps the most commonly utilized theory in the enforce- mine the validity and enforceability of its claim against the ment of charitable contracts is that of unilateral contract. Estate of Isaac Kramer. The charity’s claim was based upon This theory comes into play when the pledge is more a pledge card and promissory note, in the face amount of gratuitous in nature, such as a contribution to a char- $1.8 million, allegedly signed by the decedent approxi- ity’s general fund or for a fundraising campaign. Unlike mately a year and a half before his death, and ostensibly a bilateral contract, a unilateral contract is not deemed payable six months prior to the decedent’s death. The binding at inception but, rather, is an offer conditioned pledge was allegedly given for the purpose of supporting upon the charity performing some act at a future date, or a building campaign proposed by the charity to construct within a reasonable time. If the charity performs, then the a new ritualarium, or mikveh, for the use of the charity’s contract offer is deemed to have been accepted and the members. No payment on the pledge had been made by contract matures into an enforceable obligation. The Court of Appeals case of I. & I. Holding is an example of the unilateral contract rationale. In this case, the donor made a Over time, decisions shifted pledge to “aid and assist the Beth Israel Hospital Associa- toward the benefit of charities, tion in its humanitarian work.”14 The Court held that “[o] ur courts have definitely ruled that such subscriptions are and defenses grounded upon enforceable on the ground that they constitute an offer of a unilateral contract which, when accepted by the charity lack of consideration came by incurring liability in reliance thereon, becomes a binding obligation.”15 A request or invitation for a charity to to be disfavored. go on with its charitable work, even if merely implied, was deemed a sufficient offer and was found to have been the decedent or demanded by the charity prior to the dece- accepted, providing the requisite consideration.16 dent’s death. Representatives of the charity claimed they The theory of unilateral contract is frequently invoked consciously withheld demands for payment because of the in cases involving fundraising campaigns, such as build- decedent’s illness shortly before his death. ing campaigns. In these cases, even if the building project Objections to the charity’s petition were filed by the has not been completed or has been modified, courts will Kings County Public Administrator, as fiduciary of the dece- usually uphold the pledge as long as the charity has taken dent’s estate, and the four additional groups representing some action toward completion of the campaign.17 various purported testamentary legatees and distributees.

NYSBA Journal | January 2015 | 23 The respective objections raised multiple theories for rejec- on any construction-related expenses, such as soil samples tion of, and affirmative defenses against, the charity’s claim or architectural plans. Nor could the charity produce any including (1) forgery of the decedent’s signature, (2) lack of contracts or engagement letters from architects, engineers, due execution, (3) lack of consideration, (4) lapse upon the or contractors. There was also no proof of building permit decedent’s death, (5) laches and unclean hands, (6) expira- or zoning applications. Finally, though the charity claimed tion of the statute of limitations, (7) fraudulent inducement, to have used the decedent’s pledge to solicit other pledges, and (8) the decedent’s lack of capacity. Upon the charity’s no independent evidence of receipt or fulfillment of such summary judgment motion, two of the respondents cross additional pledges was offered. moved for summary judgment upon an additional theory of In sum, the court found that the charity had done the charity’s failure to demonstrate acceptance of the pledge nothing meaningful or substantive in reliance on the by taking action in reliance thereon. decedent’s pledge. Thus, the charity’s motion for sum- The court granted the charity’s motion for summary mary judgment on the consideration issue was denied, judgment concerning the objections based upon lack of and the cross-motions dismissing the charity’s petition due execution, laches, unclean hands, expiration of the were granted. It is worth noting that the lack of any mate- statute of limitations, fraudulent inducement, capacity rial reliance would also have foreclosed a claim under the and forgery of the decedent’s signature, because they were promissory estoppel theory. Nor could the charity have either unsupported or raised no triable issues of fact. proceeded under a bilateral contract theory, as the pledge The defense of lack of consideration, however, turned was not conditioned on receiving something in return. ■ out to be dispositive against the charity. The court noted that the pledge was ostensibly made in furtherance of a fund- 1. “[R]ecovery upon subscription agreements has become the rule rather than the exception.” In re Lord, 175 Misc. 921, 923 (Sur. Ct., Kings Co. 1941). In raising campaign, so it must be examined under the theory re Lord provides a useful and comprehensive overview of the history and case of a unilateral contract. Thus, the pledge would not become law in the area of charitable pledge enforcement. binding until the charity had sufficiently acted upon the 2. N.Y.L.J., Apr. 21, 2014, p. 24, col. 6 (Sur. Ct., Kings Co.). pledge so as to incur liability on the part of the donor. 3. Allegheny Coll. v. Nat’l Chautauqua Cnty. Bank, 246 N.Y. 369, 372 (1927). Referring to the public policy history in this area of law, 4. See In re Field, 15 Misc. 2d 950, 951 (Sur. Ct., Suffolk Co. 1959). the court stated that it has been the “noted policy of the 5. See Allegheny Coll., 246 N.Y. at 372; see also In re Lord, 175 Misc. at 922–23. courts to sustain the validity of subscription agreements 6. Allegheny Coll., 246 N.Y. at 374. whenever a counter promise of the donee can be sustained 7. Id. at 375. from the actions of the parties or it can be demonstrated 8. 276 N.Y. 427, 433 (1938). “We realize that the principles upon which that any legal detriment has been sustained by the prom- courts of differing jurisdictions have placed their decisions sustaining subscriptions for charitable purposes are all subject to criticism from a legalistic 20 ise in reliance upon the promised gift.” For instance, standpoint. Nevertheless, we feel that we should follow the decisions of our the court noted that charitable subscriptions have been own courts, extending, as they do, over a long period.” deemed enforceable where the donee has made some sub- 9. 41 N.Y.2d 746, 749 (1977). “Preliminarily, we observe that, as a matter stantive progress toward the charitable goal for which the of public policy, pledge agreements calculated to foster eleemosynary enter- prises are enforceable.” pledge was made. This would include starting construc- 10. In re Lipsky, 45 Misc. 2d 320, 322 (Sur. Ct., N.Y. Co. 1965). tion, employing architects and paying for plans, raising 11. See I. & I. Holding, 276 N.Y. at 432; see also In re Lord, 175 Misc. 923. additional pledges based upon the disputed pledge, or 12. See id. taking on a construction loan for the project. The donor’s 13. See Allegheny Coll., 246 N.Y. at 377–78. partial payment of the pledge, whether alone or in con- 14. I. & I. Holding, 276 N.Y. at 432. junction with concrete action on the part of the charity, has 15. Id. at 433. also been deemed sufficient to indicate acceptance of the 16. See id. at 434. unilateral contract. The court cited as examples, among 17. See In re Metz, 262 A.D. 508 (1st Dep’t 1941) (while the central building other cases, Allegheny College,21 I. & I. Holding,22 and Wood- was not completed as originally planned, construction was completed on portions and, thus, there was no frustration of the project so as to relieve the 23 mere Academy, along with some other notable cases such donor of liability). as In re Lord,24 In re Lipsky,25 In re Metz,26 and In re Field.27 18. See Allegheny Coll., 246 N.Y. at 374. Despite the broad policy in favor of enforcement, the 19. See I & I Holding, 276 N.Y. at 434 (“it is only when a request or invitation court found that the charity in Kramer was unable to meet [for the charity to perform] cannot be implied in fact that it is necessary to the burden of showing it had meaningfully acted in reliance invoke that doctrine”); see also In re Lord, 175 Misc. at 926. upon the pledge. Indeed, it was undisputed that no actual 20. Kramer, N.Y.L.J., Apr. 21, 2014, p. 24. construction had begun on the proposed building project. 21. 246 N.Y. 369 (1927). 22. 276 N.Y. 427 (1938). Nor was there any specific date upon which construction 23. 41 N.Y.2d 746 (1977). was to begin, or any reasonable time frame for completion 24. 175 Misc. 921 (Sur. Ct., Kings Co. 1941). of the project. The Court characterized the construction 25. 45 Misc. 2d 320, (Sur. Ct., N.Y. Co. 1965). project as more of a “hoped-for occurrence” than an actual 26. 262 A.D. 508 (1st Dep’t 1941). 28 plan. Moreover, despite its claims to the contrary, the char- 27. 15 Misc. 2d 950 (Sur. Ct., Suffolk Co. 1959). ity could not prove that it had expended any sums of money 28. See Kramer, N.Y.L.J., Apr. 21, 2014, p. 24.

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To Order call 1-800-582-2452 or visit us online at www.nysba.org/pubs Source Code: PUB2854 NAT WASSERSTEIN ([email protected]) is the managing director of Lindenwood Associates, a strategic development and restructuring firm helping owners of small to medium-sized businesses navigate through times of change, redirection and financial distress. Part 1 of the article appeared in the November-December 2014 NYSBA Journal. Buying or Selling a Small or Solo Practice – Part 2 By Nat Wasserstein

The Advantage for New Lawyers of Buying a Law Practice Purchasing a law practice can be just as advantageous to newer lawyer purchasers as to retiring sellers. By purchasing a practice, newer lawyers are able to hang out their own shingle with an established client base, a built-in mentor, a trained staff, and equipment. Granted, fewer and fewer newer lawyers are willing to enter solo practice, and even fewer may have the financial means to buy a firm outright. Many beginning lawyers might immediately discredit the idea of purchasing a legal practice. Instead, they continue to pursue the diminishing opportunities of large law firm employment while living in the basement of their parents’ home, unemployed. However, golden opportunities exist for entrepreneurial beginning attorneys, big firm refugees, or other small or solo practitioners wanting to grow their practice areas and client base, who are willing to take a risk on an established clientele.

Liability Considerations Involved in the Selling and Purchase of a Law Practice Additional consideration should be paid to the extension of liability coverage post-sale. Many malpractice carriers will automatically extend a reporting period of 60 to 90 days following the termination of coverage while also Strategic Succession Planning, the Key to Success providing the option to buyers to purchase an extended Too often, attorneys fail to consider their practice as reporting period endorsement for additional coverage. an asset. Many attorneys fail to have anything close to Moreover, absent a written agreement between the par- resembling a defined income plan to pay them income ties, buyers may even have the duty to report any mal- during their retirement, and not thinking of the firm as practice violations of the selling attorney to the clients if an asset may lead to a large loss of potential retirement- those violations are discovered post-purchase. age income. It is also needless for a practitioner to throw away a book of business and referral network he or she General Steps to Selling a Law Practice has spent decades building. So, attorneys approaching Once an attorney has committed to selling his or her retirement age must begin to think of their practices, practice and has carefully considered the relevant regardless of size, as assets that can provide them with a ethical and professional issues surrounding retire- source of funds for their retirement. By so doing, a prac- ment and cessation from practice, the attorney must titioner can stop dreading the loss of a future stream of take steps to implement his or her plan and begin the income and celebrate ending the practice by getting back selling process. some of the value invested into it.1

26 | January 2015 | NYSBA Journal But appropriately including the practice itself as Take advantage of services offered by State Bar and an asset requires practitioners to undertake succession law school career centers, which can prove very helpful planning wherein they consider all aspects of the prac- during this process; they have the systems in place to tice. A strategic and well-thought-out succession plan offer confidential practice listings as well as to assist with is needed for a successful (and ethical) sale. Because buyer inquiries.6 attorneys have spent their lifetimes issue-spotting and devising strategies, strategically planning their own For Buyers: Identifying a Potential Target Firm practice succession, though time consuming, should be Prospective buyers must understand that when they manageable. Attorneys should look first at their crisis purchase a law firm, they are obligated to undertake the plan, which can be used to help prepare the practice’s representation of all of the clients in a book of business, succession strategy. and to represent them competently, irrespective of wheth- The foremost consideration should be a procedure er said clients generate high fees.7 Here, too, the use of for client transition, and, for this, timing is critically a third-party advisor with law practice transactional important. A successful client transition plan allows experience can prove helpful in identifying, evaluating retiring attorneys to ease out of practice while gradu- and conducting due diligence, structuring the deal and ally transitioning clients over a period of several years payment, and assisting the seller with the technical and before their anticipated retirement date. Consider- ongoing obligations post-purchase. ations for such a transition may include closed client The due-diligence obligations of purchasers are made files, notification systems and updated contact infor- difficult by the doctrine of attorney/client privilege, mation for current files, and a streamlined process for which may prevent, in some instances, the potential substituting out the retiring attorney as counsel on buyer from inspecting the clients’ payment status and active cases.2 files. One way around this potential issue is to complete In addition, attorneys must think not only about an inspection of the practice’s books instead, reviewing the hardware equipment, which might be sold as part financial statements and tax records over the last three to of a practice, but also the other electronic aspects of five years. In addition, potential buyers should do a lien the firm, such as trademarks, photographs, cloud and title search on the business, ensuring no outstand- management software, and other online accounts. For ing lines of credit exist for which the buyer may become example, during a disability requiring him to implement his own crisis system, one Ohio-based practitioner suggested memorializing the details for such technology-based items in an easily accessible form The foremost such as a computer, cloud file, or memory stick.3 For old-fashioned practitioners who prefer pen and paper, consideration should be a using a Key Technology Information Form, such as the procedure for client one provided by the ABA in partnership with Active Online, Inc., is a way to start thinking about the techni- transition, and, for this, cal aspects of the practice.4 timing is critically important. Connecting Sellers With Buyers For Sellers: Identifying a Potential Buyer Rule 1.1 requires that sellers exercise competency responsible for repaying. Finally, potential buyers, like in identifying prospective buyers for the practice.5 sellers, must review the selling attorney’s malpractice Finding a potential buyer requires maximum due and complaint history. diligence as the seller will be turning over the reins on client matters. The attorney-seller also is giving Evaluating the Value of the Practice away the goodwill of his or her name and firm to an Naturally, a portion of the value of a firm comes from unknown practitioner who may very well be a recent the real and personal property it owns. For instance, a law school graduate. The assistance of an advisor firm may own an office space, desks and chairs, copy or consultant with divestiture experience to evalu- machines, filing cabinets, and computer equipment. It ate and deliver to the seller potential purchasers can may also own a well-recognized address and phone num- prove invaluable in this process and ensure the suc- ber, a web domain and custom computer software, the cess of the transaction. Among other advantages, value of which, for the most part, is determinable. such an advisor can assist the seller in ensuring the However, while it is easy to place a value on real purchaser can competently handle all current mat- and personal property owned by a practice, one of the ters, has no history of malpractice or bar complaints, greatest challenges and also, perhaps, the most critical and has an active license. to selling a firm, is the valuation of its goodwill, includ-

NYSBA Journal | January 2015 | 27 ing name and referral network. This is in addition to its book of business, which is often made up of sporadic or one-time clients or those whose continued business is The New York State Bar dependent on longstanding mutual trust and goodwill, making it difficult to evaluate current and future cash Association, in Ethics flow. Although the rules regarding the sale of legal prac- Opinion 961, found that tices have changed, the truth in ABA Opinion 266 has not: “Clients are not merchandise.”8 Thus, in reality, the future fees are the only way sale of a book of business is merely a recommendation or referral of past, present, and future clients to the purchas- to effectively capture a er, backed by the earned goodwill of the selling attorney. practice’s “goodwill.” Unfortunately, there is no universally accepted method of valuing a legal practice. Thus, once the seller and purchaser have been identified, obtaining the services of valuation experts may be a prudent course of action. and cases expected to transfer to the new owner, tangible Given the unique nature of the practice of law, com- assets, and other intangibles, which is then multiplied by bined with the immaturity of the market for buying and the firm’s annual net revenue to derive a value. However, selling law practices, the valuation of a book of business this method is inherently difficult to use, and, in truth, is difficult to determine on one’s own, using traditional no rule of thumb exists for determining the multiple to methods. These might include using industry multiples, be used. although some estimation of a practice’s value may be For example, looking at Mr. Hildey’s practice, let determined by looking at recent sales in the same geo- us assign the practice a rule-of-thumb multiple of 50%. graphic area, practice area, practice size and niche prac- When this is multiplied by the firm’s annual revenue of tice genre. Compounding this, the details of many sales $200,000, the sale price of Mr. Hildey’s practice would are kept confidential to protect attorney/client privilege, be $100,000. Such a method is not, of course, without its practice sizes are always changing, and trends in the pro- drawbacks, including a standard deviation of between .3 fession may not be positive. Also, the existence of a “tax- and 1.0,9 and the unpredictability of client conduct post- onomy” problem in the naming of practice areas (e.g., sale. Elder Law vs. Wills and Estate Planning), and economic A second valuation method may also be used to outlooks for the legal practice may be grim on both a local determine the value of the firm after the fact. Using the and national scale. earn-out method, after an initial down payment for the Likewise, it is impracticable to value firms based on firm’s tangible assets, the purchaser would pay the seller how they might have been valued during divorce pro- a percentage of its net revenue over a fixed period of time ceedings, as in divorces there is relative certainty the for the goodwill of the firm.10 Applying this method to business will move forward and the divorce should have our hypothetical case study, the purchasing attorney and little impact on the future goodwill of the practice. Mr. Hildey may agree the buyer would pay one-third of Let’s say Timothy Hildey, an attorney with a solo the practice’s revenue for a period of five years for the estate-planning practice of 20 years’ duration, wants goodwill of Mr. Hildey’s practice. Should the firm earn to sell his law firm. Mr. Hildey declared an income of $200,000 per year post-sale, Mr. Hildey would be entitled $200,000 from his practice when he and his first wife to approximately $66,000 per year, or $330,000 over a divorced five years ago, but, as he looks toward selling, period of five years. he is unable to claim the same value for his firm – because Given the unpredictability of retaining the firm’s book he won’t be a part of the firm’s future. Fortunately for of business post-sale, the inability to secure future cash Mr. Hildey, the estate planning practice is one of the flow, and the risk-adverse nature of attorneys, the earn- easiest types of practices to value as there is a somewhat out method is the preferable valuation method of buyers. consistent stream of clients whose documents need to It allows purchasers to pay only for realized business plus be updated and revised as well as the continual probate tangible assets without having to go through the difficult of deceased clients’ estates. For bankruptcy or criminal determination of the fair market value of the firm’s good- practices, for instance, valuation may be significantly will and book of business. This allows the market value more difficult as such clients are unpredictable and typi- to determine itself. Conversely, sellers would prefer a cally one-off. rule-of-thumb method as it provides for a lump payment An experienced advisor can assist the seller and pur- and is not dependent on the future business success and chaser in structuring a deal and placing a value on the acumen of the purchaser.11 Of course, the latter method practice. One of the methods for valuation of a firm is assumes the purchasing attorney has enough resources to called applying a “rule-of-thumb.” This assigns a multi- purchase a firm, which may be difficult for newer attor- ple to the book of business based on the number of clients neys who may already have a lot of debt.

28 | January 2015 | NYSBA Journal Additionally, the New York State Bar Association, 3. Communication of intent to sell in Ethics Opinion 961, has specifically supported such 4. Qualifying of prospective buyers through robust an earn-out method.12 The NYSBA found that future due diligence by a third-party fees are the only way to effectively capture a practice’s 5. Negotiations with prospective buyers “goodwill,” saying, as an example, that 20% of a buyer’s 6. Conflicts check by prospective buyers net income over a three-year period was a reasonable 7. Modification of purchase price for clients removed structure that did not violate any fee sharing rules.13 through conflicts check Thus, if Mr. Hildey were a New York practitioner, he 8. Renegotiation could not go wrong with structuring a deal for the sale 9. Signature of the purchase agreement of his practice where the purchaser paid him 20% of the 10. Communication of the sale to all clients firm’s net revenue for a three-year period post-sale. Tak- 11. Implementation of the client transition plan ing the above figures of $200,000 per year post-sale, this And sample steps of such a sale from a buyer’s perspec- would result in Mr. Hildey earning $40,000 per year or tive would largely be the same, differing only in steps $120,000 over the course of the three-year sale period. one and two: Clearly, a period greater than three years could be used. 1. Honest evaluation of legal skills and ability to man- The best method for valuation most likely combines age the seller’s practice the two methods, satisfying both the buyer and seller: Mr. 2. Qualifying of prospective target practices through Hildey may want to consider structuring a deal with his robust due diligence by a third-party buyer whereby he receives 5% during the due-diligence One existing rule of thumb in the practice of law phase, 20% upon closing, and the remainder under a is to “never be your own client”; thus, the services of multi-year earn-out structure. an experienced independent facilitator and negotiator Another win-win option for everyone involved is the may prove invaluable. As Yogi Berra would say, “[t]he “of counsel” format. This method is effective, especially future isn’t what it used to be.” For buyers and sell- when used as a part of a long-term client transition plan. ers of solo and small practices, the future is getting It allows the purchasing attorney to gradually take on brighter every day. ■ more and more client matters until eventually the selling attorney is phased out; thereby, the purchasing attorney 1. The type of practice, clientele, and geographical location are just some of the variables that determine the viability and reliability of income. retains the seller’s book of business. At the same time, the 2. See Dennis A. Rendleman, The Evolving Ethics of Selling a Law Practice, seller is also mentoring a new attorney and overseeing 29 GPSolo 4 (2012). For transition planning for small- to medium-sized firms the practice during the transition process. It also allows that are not solo practices, see Roy S. Ginsburg, Successful Succession: Keep attorneys to mitigate any ethical dilemmas related to fee Your Best Clients When Boomer Lawyers Leave, www.royginsburg.com/ successful-succession-keep-your-best-clients-when-boomer-lawyers leave. sharing during the transition process. 3. Lloyd D. Cohen, How My Emergency Plan Saved My Practice, 29 GPSolo 4 Alternative methods exist for evaluating a practice, (2012). such as the asset-based approaches of book value, adjust- 4. See Wells H. Anderson, How a Key Technology Information Form Can Save ed book value, debt assumption, economic value and Your Practice, 29 GPSolo 4 (2012). A sample Key Technology Information Form combinations thereof.14 can be found at http://www.activeonlineinc.com/forms. 5. N.Y. Rules of Professional Conduct, Rule 1.1. Conclusion and Sample Timeline 6. Washington State Bar Ass’n, Practice Transition Opportunity, http:// In conclusion, there has been no better time to sell or www.wsba.org/Resources-and-Services/Ending-Your-Practice/Sell-a- buy a law practice, and doing so can be manageable for Practice. both parties if strategically planned for and structured. 7. Id. Sellers and buyers must remember to keep the client at 8. ABA Opinion 266 (1963). the forefront of all sales by following five key guidelines: 9. See Roy S. Ginsburg, Selling Your Law Firm: What It’s Worth, http://www. (1) protecting client confidences and confidentiality, (2) royginsburg.com/selling-your-law-firm-what-its-worth. conducting due diligence, (3) ensuring the entire practice 10. While sales may be financed based on revenue earned over a period of time, Rule 1.17 prohibits such sales where such revenue is the result of has been sold, (4) notifying all clients of the sale and the increases in fees charged to the clients. See Comment [10] to Rule 1.17. right to request their files and obtain alternative counsel, 11. See Ginsburg, supra note 9. and (5) ensuring billing rates are not raised as a result of 12. N.Y. Bar Ass’n Comm. on Professional Ethics Op. 961 (2013). the sale. Sample steps of such a sale, taking into account the fore- 13. Id. going, may look as follows from a seller’s perspective: 14. For an excellent and analytical review of these alternative valuation methods, see William F. Brennan, “Law Firm Valuation Part III” in Report to 1. Development and implementation of succession Legal Management, Altman Weil. plan, including a client transition plan 2. Valuation of the legal practice and goodwill of the law firm

NYSBA Journal | January 2015 | 29 Aftereffects New Legislation Addresses the Inheritance Rights of a Posthumously Conceived Child By Anthony T. Selvaggio and Nancy E. Klotz

dvances in biotechnology have outpaced New ANTHONY T. S ELVAGGIO is in private practice in Rochester, NY, York inheritance laws, enacted long before concentrating in the areas of wealth transfer planning, the drafting of Aposthumously conceived children were a reality. wills and trusts, and representing individual and corporate fiduciaries in In the past 10 years, the use of assisted reproductive the administration of estates and trusts. His prior professional experience technologies has doubled; in 2012 these methods resulted includes legal practice with the law firm Nixon Peabody LLP and wealth in the birth of more than 65,000 infants.1 Although it is planning with the firm of Cobblestone Capital Advisors LLC. Mr. Selvaggio unknown how many of these infants were posthumous received his law degree from the State University of New York at Buffalo, School of Law and his undergraduate degree from St. John Fisher College. conceptions, as of 2011 the Social Security Administration reported claims from over 100 posthumously conceived 2 children. “[T]here is a need for comprehensive NANCY E. KLOTZ is a Vice President, Senior Trust Counsel for Tompkins legislation to resolve the issues raised by advances in Financial Advisors, where she develops estate planning strategies for biotechnology,” implores Surrogate Renee Roth in In re clients, working with their legal, tax and investment advisors to design, Martin B.3 This case is the only published opinion in New implement and administer appropriate trust and estate structures. Before York confronting the question of the inheritance rights joining Tompkins, she previously served in private practice concentrating under a trust of a posthumously conceived child. in the area of trusts and estates. She received her B.A. degree in English The New York State Assembly responded through literature from Yale College, and her J.D. from the University of California, State Assembly Bill A07461A.4 The bill, which adds to Los Angeles School of Law, Order of the Coif. the Estates, Powers and Trust Law (EPTL) a new section

30 | January 2015 | NYSBA Journal 4-1.3 (titled “Inheritance by Children Conceived After the child is eligible for Social Security survivor benefits of a Death of a Parent”) and amends existing EPTL 11-1.5,5 deceased parent. was prompted by a request from the Chief Administrative In New York, the statutory law governing descent Judge in response to a call for action from the Surrogate’s and distribution was enacted long before advances in Court Advisory Committee. The bill passed in both the biotechnology allowed for a posthumously conceived Assembly (98-36) and the Senate (59-0). It was signed into child. EPTL 4-1.1(c) specifically provides that distributees law by Governor Cuomo on November 21, 2014. take as if born during the decedent’s lifetime only This article addresses the inheritance rights of if conceived prior to the decedent’s death and born posthumously conceived children under New York law alive thereafter. Based on this language, posthumously and the new statute. It begins by reviewing advances conceived children are not considered heirs and are in biotechnology that allow a child to be conceived not eligible for Social Security survivor benefits under posthumously and providing a brief history of the law in current New York statutory law. this area. Key elements of the statute are then outlined. In re Martin B.10 is the only published opinion outside Finally, the authors conclude by discussing a few of the the context of Social Security eligibility to address the issues and planning considerations raised by the new rights of posthumously conceived children. In this law. case, Surrogate Roth examined the question of whether the terms “issue” and “descendant” as used in trust Methods of Posthumous Conception documents included two posthumously conceived There are a number of reasons for the increase in the children. The court concluded that the two posthumously use of assisted reproductive methods. These include conceived children were trust beneficiaries. the decreasing stigma associated with these techniques Martin B. was an advice and direction proceeding and improvements in technology, which have resulted brought by the trustees of seven trusts created by the in lower costs. The average age of women giving birth Grantor in 1969. The Grantor, also the life income to a first child is rising, which may also result in a more beneficiary, died in July 2001. He was survived by his frequent need for these methods. wife and a son. He was predeceased by only a few months As the use of reproductive technology increases, by a second son, James, who had died in January 2001 of so also has the decision to store genetic material in Hodgkin’s lymphoma. James had no children, but he had anticipation that one’s fertility may be compromised. cryopreserved semen and his directions provided that Cryopreservation is a method of storing human genetic in the event of his death it was to be held subject to his material, including sperm, ova and embryos, outside wife’s instructions. Three years after James’s death, his the human body at very low temperatures. It is the wife, Nancy, used the cryopreserved semen to conceive standard storage method used at fertility clinics, and a child through IVF; she had a son. Two years later human reproductive material can be preserved in viable she gave birth to another son using the same method. condition in this manner for as long as a decade.6 Thereafter the cryopreserved semen was destroyed. Because of the length of time genetic material can be In determining that these two boys were beneficiaries preserved, the opportunities for posthumous conception of the 1969 trusts, the court noted the father’s assumption have increased. that his children would be beneficiaries of the trusts and Two primary reproductive techniques use cryo- the principal. Indeed, the Restatement (Third) of Property preserved material: intrauterine insemination (IUI) and states that if an individual considered the child his own in vitro fertilization (IVF). IUI is a medical procedure then society through its laws should do so, too. However, that involves placing sperm into a woman’s uterus to this was not the controlling factor. Rather, the controlling facilitate fertilization.7 IVF involves removing eggs from factor was the grantor’s intent as determined by a a woman’s ovaries and fertilizing them outside her reading of the trust documents. Although the documents body. The resulting embryos are then transferred into a were silent on the question of posthumously conceived woman’s uterus.8 The woman can be either the genetic children, the court concluded that a sympathetic reading mother or a gestational carrier, a woman with no genetic of the documents led to the conclusion that the grantor connection to the child. intended to benefit his bloodline. As a result, the two posthumously conceived children were deemed to be Background and Current New York Law beneficiaries of the trusts. Case law addressing the rights of a posthumously conceived child has primarily arisen in the context of EPTL 4-1.3 Social Security law. In the landmark case of Astrue v. The statutory framework of EPTL 4-1.3 includes nine Capato,9 the U.S. Supreme Court held that the Social subparagraphs (a)–(i). Space limitations do not allow a Security Administration could determine eligibility for detailed exploration of each subsection of the statute; survivor benefits based on state intestacy laws. If a child accordingly, we focus primarily on the substance of the is a distributee of the decedent under state law, then the first three subparagraphs.

NYSBA Journal | January 2015 | 31 The first section, EPTL 4-1.3(a), sets forth key letters (or in the Surrogate’s Court having jurisdiction definitions pertinent to interpreting the statute. The term over the genetic parent in the event no letters are issued) “Genetic Parent” is defined as meaning either a man who within seven months of the genetic parent’s date of death. provided sperm or a woman who provided ova that was Time Requirement EPTL 4-1.3(b)(4). The genetic child subsequently used to “conceive a child after the death must be in utero no later than 24 months after the genetic of the man or the woman.” Next, “Genetic Material” is parent’s death or actually born no later than 33 months defined as the “sperm or ova provided by the genetic after the genetic parent’s death. parent.” Finally, “Genetic Child” is defined as the child of the “sperm or ova provided by a genetic parent, Principles but only if and when such child is born.” While these EPTL 4-1.3(c) provides the requirements for the execution definitions are simple, they represent a monumentally of the written instrument demanded by EPTL 4-1.3(b)(1) significant change in the arena of estate planning. Prior and a statutory form to satisfy this requirement. This to this legislation, attorneys had to be concerned with section of the statute enumerates four principles regarding two categories of descendants – biological children and this written instrument: adopted children. When EPTL 4-1.3 became law, it Manner of Execution. It must signed by the genetic introduced a third type of descendant of which attorneys parent in the presence of two adult disinterested will need to be cognizant – the “genetic child.” witnesses who must also sign the instrument. The statute particularly precludes the authorized representative from Case law addressing the rights serving as a witness. Revocation. It may only be revoked by a written of a posthumously conceived instrument executed in the same manner as the original child has primarily arisen in the written instrument. Alteration or Revocation by Will Prohibited. The statute context of Social Security law. expressly prohibits the ability to alter or revoke the written instrument by means of the genetic parent’s will. Requirements Provision for Successor Representative. The statute allows EPTL 4-1.3(b) sets forth four requirements that must be met the genetic parent to name a successor to his or her before a genetic child will be included in a disposition of authorized representative who would act if the primary property which provides for issue. This is very important representative was unwilling or unable to act. because it establishes that merely meeting the definition of After setting forth these four principles, EPTL a genetic child is insufficient for the child to be included 4-1.3(c)(5) provides a statutory form to satisfy the written in a class eligible to receive a disposition of property instrument requirement. The statute notes that the pursuant to a will or trust. To qualify a genetic child as written instrument “may be substantially in the following issue, the following four requirements must be satisfied: form,” which leads to the conclusion that attorneys will Written Instrument Requirement EPTL 4-1.3(b)(1). The have some freedom to alter this form, unlike the more genetic parent must execute a written instrument expressly stringent requirements which govern the statutory New consenting to the use of his or her genetic material for York Statutory Power of Attorney. A copy of the form is the purposes of posthumous reproduction. The written included as a sidebar to this article. instrument must also authorize a specific person to make decisions regarding the use and application of his or her Implications of the Statute genetic material after the genetic parent’s death. EPTL 4-1.3 represents a significant leap forward in Notice Requirement EPTL 4-1.3(b)(2). The genetic addressing this nascent area of the law. Clarity is needed, parent’s authorized representative must provide notice of and this statute will provide welcome guidance to the existence of the genetic material to either the personal testators, grantors, fiduciaries and their attorneys. While representative of the genetic parent’s estate or, in certain the statute is helpful, it is also quite circumscribed and cases, to a distributee of the genetic parent. Notice to may give rise to new issues that will need to be addressed a personal representative must be made within seven by attorneys as they assist clients in crafting estate plans. months from the date of issuance of letters testamentary or administration, but if such letters have not been Limitations on Eligibility issued within four months after the genetic parent’s date One of the most striking aspects of the statute is its of death, then such notice must instead be made to a limited scope. EPTL 4-1.3 creates a new classification of distributee of the genetic parent within seven months of potential heir in the genetic child, but it also severely the genetic parent’s date of death. restricts those who will qualify to be included under this Filing Requirement EPTL 4-1.3(b)(3). The genetic definition. The statute does this by establishing a series of parent’s authorized representative must record the layered requirements which must be met before a genetic written instrument in the Surrogate’s Court granting child will receive inheritance rights.

32 | January 2015 | NYSBA Journal I understand that, unless I revoke this consent Statutory Form: and authorization in a written document signed EPTL 4-1.3(c)(5) by me in the presence of two witnesses who also sign the document, this consent and authorization will remain in effect for seven years from this day (c) The written instrument referred to in and that I cannot revoke or modify this consent subparagraph (1) of paragraph (b) of this section: and designation by any provision in my will. (5) may be substantially in the following form and must be signed and dated by the genetic Signed this day of ______, ______, parent and properly witnessed: ______. I, ______, ______(Your name and address) (Your signature) consent to the use of my (sperm or ova) Statement of witnesses: (referred to below as my “genetic material”) to conceive a child or children of mine after my I declare that the person who signed this death, and I authorize document is personally known to me and appears to be of sound mind and acting willingly and free ______from duress. He or she signed this document in ______my presence. I am not the person authorized in (Name and address of person) this document to control the use of the genetic to decide whether and how my genetic material material of the person who signed this document. is to be used to conceive a child or children of mine after my death. In the event that the person authorized above dies before me or is unable to Witness: ______exercise the authority granted I designate Address: ______(Name and address of person) Date: ______

Witness: ______to decide whether and how my genetic material is to be used to conceive a child or children of Address: ______mine after my death.

Date: ______

The first layer consists of the written instrument, The bill provided no background commentary on why notice and filing requirements set forth in EPTL the 24/33 dates were chosen. In comparison to the New 4-1.3(b)(1)–(3). A failure on any of these points will bar York law, the Uniform Probate Code (UPC) requires that the posthumously conceived child from inheriting. The a child must be in utero within 36 months or born within fourth requirement set forth in EPTL 4-1.3(b)(4), that the 45 months of death.11 The comments to the 2008 UPC say child must be in utero within 24 months or born no more that this allows for a surviving spouse to grieve and then than 33 months after the genetic parent’s death, adds yet make a decision to move forward with a pregnancy.12 another restriction which will further reduce the number Certainly, a time requirement is necessary to close the of posthumously conceived children who will inherit window for the appearance of posthumously conceived pursuant to this law. genetic children. Without a time limitation, fiduciaries

NYSBA Journal | January 2015 | 33 would never have any certainty that they have accurately potential posthumously conceived children. Below identified the beneficiaries. However, this relatively we discuss several issues likely to arise in such client narrow time frame will reduce the number of eligible planning conferences. posthumously conceived children. The effective dates of EPTL 4-1.3(f) raise an important Yet another limiting factor is the effective dates of the issue because a testator or grantor who is subject to statute. The statute makes clear that a genetic child will the effective date will in turn be subject to this statute be classified as a distributee of the genetic parent if the unless he or she includes language in the instrument requirements of EPTL 4-1.3(b) are met regardless of when expressly prohibiting the application of the statute to the genetic parent created the effective instrument. his or her planning. Attorneys will need to discuss this

The new statute provides much needed legislative guidance in a critical area where rapidly developing biotechnology has collided with traditional law.

Notwithstanding the broad applicability for a genetic matter with their clients and ask them whether they parent, EPTL 4-1.3(f) provides an effective date with wish to restrict the inheritance rights of posthumously regard to instruments created by persons other than the conceived genetic descendants. Such a restriction could genetic parent. In most cases, this will be the ancestors be quite appealing to testators and grantors considering of the genetic parent. First, this section sets an effective the settlement delays and additional costs that could date for wills created by persons other than the genetic result if they allow for the possibility of posthumously parent. In this case, the effective date, September 1, 2014, conceived genetic descendants. This, coupled with the applies to the date of death of such person and not the reality that such genetic descendant could possibly be date the instrument was created. Accordingly, all wills born to a parent with whom the client has no connection, of persons who die after September 1, 2014, are subject leads the authors to believe that such restrictions may to the provisions of this statute. The effective date also prove popular. Additionally, attorneys may want to applies to all lifetime trusts executed by persons other counsel clients so that any existing documents to which than the genetic parent on or after September 1, 2014, and the new law may apply can be amended consistent with to all lifetime trusts created by persons other than the the grantor’s wishes. genetic parent prior to that date in which the grantor has The question also arises regarding the choice of the the power to revoke or amend the trust as of the effective authorized representative of the genetic parent. Who, date, without regard to the date of execution. other than a surviving spouse or partner, would be These effective dates will further restrict the number willing to serve as an authorized representative?14 This of posthumously conceived children who will qualify as newly created role, with the attendant risk of liability, issue of the ancestor of the genetic parent.13 The reasoning could be a precarious office and is one that comes without behind these limitations, particularly the September compensation. If the primary authorized representative’s 1, 2014, effective date, is not difficult to discern. The authority is revoked due to divorce as provided in the effective date essentially excludes the innumerable statute, how might an alternate receive notice of this existing irrevocable trusts, created by will or agreement, individual’s new obligations? What if the authorized which would otherwise be impacted by the possibility of representative is not aware of the appointment and new, posthumously conceived heirs. The effective date fails to satisfy the statutory notice requirements? Might avoids creating a legal nightmare for trustees, particularly a non-spouse, non-partner authorized representative those who have already terminated trusts and distributed have some exposure for failing to notify a surviving the remaining principal to what they thought was a fixed partner about stored genetic material for possible use class of heirs. within the statutory time frame, even if the other notice requirements of the statute are satisfied? Planning Considerations Other areas of risk for the authorized representative While the statute limits the number of qualifying include the following considerations. What if the posthumously conceived children, it still has broad authorized representative fails to give timely notice implications for clients and their attorneys. It appears or fails to properly record the written instrument? that at least a cursory discussion of the statute will arise Would the genetic child have a cause of action against in nearly every conference regarding estate planning, the authorized representative for breach of duty? Just with much more detailed discussions occurring in imagine if the genetic child was a potential heir to a large cases of parents who desire to plan for their own trust. Consider also the 24/33 month time constraints.

34 | January 2015 | NYSBA Journal Often the type of reproductive techniques employed with 8. Centers for Disease Control, 2012 Assisted Reproductive Technology genetic material are not always successful on the first National Summary Report, Appendix B: Glossary of Terms. attempt. One can imagine an authorized representative 9. 132 S. Ct. 2021 (2012). prodding the process along in fear that the child will 10. 17 Misc. 3d 198 (Sur. Ct., N.Y. Co. 2007). be in utero or born outside the bounds of the 24/33 11. Uniform Probate Code §§ 2-120(k), 2-121(h). month requirement. It seems likely that the only persons 12. Comments to Uniform Probate Code §§ 2-120(k), 2-121(h). who would be willing to subject themselves to such 13. Note that in addition to the new statutory limitations, prior potential risks of liability would be the uninformed or the limitations in the EPTL still apply. The memo accompanying the statute (see http://assembly.state.ny.us/leg/?default_fld=&bn=A07461&term= prospective parent of the genetic child. 2013&Summary=Y&Actions=Y&Votes=Y&Memo=Y) provides examples. Finally, the amendment also provides useful These examples assume that all requirements of EPTL 4-1.3(b) have been guidance on the issue of disposition of stored genetic met for the husband as the deceased genetic parent: material. EPTL 4-1.3(i) states that genetic material will Example 3: Shortly after husband’s death, husband’s mother dies be exclusively governed by the terms of this statute intestate survived by her spouse and issue. Child is a distributee of the husband’s mother only if child is living at mother’s death (or and the contractual agreement made with the facility is en ventre sa mere and is then born alive and survives 120 hours) providing storage of the genetic material. This section because under EPTL 4-1.1(c) all of mother’s distributees must at makes clear that a person cannot dispose of his or least be conceived before her death. her genetic material by other means, including a will Example 4: Shortly after husband’s death, mother dies testate and her will, duly admitted to probate, includes a general disposition or other written instrument. Given potential risks to of $10,000 “to each of my grandchildren living at my death.” Child an authorized representative, it may be important to participates in the gift only if child is living at mother’s death (or stress to clients the value of conversations with the is en ventre sa mere and is then born and survives for 120 hours). named authorized representative and any alternates 14. EPTL 4-1.3(d) expressly revokes the authority of an authorized representative named in a written instrument if such authorized similar to recommended conversations with any representative is a spouse of the genetic parent and a judgment of divorce agents named in a health care proxy. has been issued terminating the marriage. 15. 17 Misc. 3d 198 (Sur. Ct., N.Y. Co. 2007). Conclusion 16. The memo accompanying the statute is at http://assembly.state. The new statute provides much needed legislative ny.us/leg/?default_fld=&bn=A07461&term=2013&Summary=Y&Actions guidance in a critical area where rapidly developing =Y&Votes=Y&Memo=Y. biotechnology has collided with traditional law. As clients and attorneys work with the new law, issues and planning considerations will inevitably arise. Ironically, the case that spurred the legislative process, In re Martin B,15 would have had a very different result under the new law. Neither of the two children in Martin B, who were held to be beneficiaries of their grandfather’s 1969 trusts, would have qualified as genetic children under the new law. Both boys were posthumously conceived and born outside the 24/33 ■ COURT & LITIGATION One Grand Central Place month requirements of the statute.16 ■ 60 East 42nd Street ■ BANKRUPTCY & DEPOSITORY Suite 965 1. Centers for Disease Control and Prevention, Assisted Reproductive New York, NY 10165 Technology (ART), http://www.cdc.gov/art (last visited Nov. 1, 2014) ■ TRUSTS & ESTATES 2. Benjamin C. Carpenter, Sex Post Facto: Advising Clients Regarding 212-986-7470 Tel Posthumous Conception, 38ACTEC L.J. 187, 196 (2012) (citing Petition ■ INDEMNITY & MISCELLANEOUS 212-697-6091 fax for Writ of Certiorari at 19, Astrue v. Capato, 132 S. Ct. 2021 (2012) (No. 11-159)). ■ LICENSE & PERMIT [email protected] 3. 17 Misc. 3d 198 (Sur. Ct., N.Y. Co. 2007). 4. New York State Assembly, http://assembly.state.ny.us/leg/?default_ fld=&bn=A07461&term=2013&Summary=Y&Actions=Y&Memo=Y&Text= Y#jump_to_Text (last visited Nov. 3, 2014). 5. This article covers EPTL 4-1.3 exclusively and does not deal with the amendments to EPTL 11-1.5. However, the main point of those amendments to EPTL 11-1.5 are to clarify the issues related to a fiduciary’s duty with regard to the timing of distributions in cases where SURETY BOND SPECIALISTS the birth of a qualifying genetic child is anticipated. 6. Sheri Gilbert, Note, Fatherhood from the Grave: An Analysis of Postmortem Insemination, 22 Hofstra L. Rev. 521, 525 (1993). 212-986-7470 7. Centers for Disease Control and Prevention, 2012 Assisted Reproductive Technology, Fertility Clinic Success Rates Report, Appendix B: Glossary of Terms.

NYSBA Journal | January 2015 | 35 POINT OF VIEW BY ADAM J. GANA AND ALEXANDER A. TRUITT

Should Non-Attorneys Represent Parties in FINRA Arbitration for Compensation?

Introduction prohibit non-attorneys from charging fees to represent New York Judiciary Law § 484 governs the unauthor- parties in Financial Industry Regulatory Authority ized practice of law; it holds the formidable title: (FINRA) arbitration.8 “None but Attorneys to Practice in the State.”1 The First, we address whether representation of parties statute’s legislative intent is to protect the public and in FINRA arbitration involves significant legal practice. promote New York’s policy against the unlicensed Then we look at how the N.Y. Rules govern non-attorney practice of law within the state.2 Together, Judiciary conduct. Third, we look at how other states address the Law §§ 478 and 484 prevent non-attorneys from among issue. Finally, we discuss what measures New York can other legal and quasi-legal services: performing clos- take to resolve the issue of non-attorney representation in ing services for real estate transactions;3 prosecuting FINRA arbitrations. minor, non-jury criminal cases;4 marketing and selling do-it-yourself divorce kits;5 advising debtors during FINRA Arbitration and the Practice of Law bankruptcy;6 and giving tax advice outside of prepar- At its most basic level, arbitration is similar to litigation ing a tax return.7 The Judiciary Law, however, does not in that both enlist uninterested third parties to resolve a actually define the “practice of law” and thus does not dispute between two or more parties. FINRA operates

ADAM J. GANA ([email protected]) is the managing partner of Gana LLP. His practice focuses on all aspects of securities arbitration and complex commercial and business litigation. Mr. Gana is a member of the New York State Bar Association’s Securities Litigation and Arbitration subcommittee. He earned his undergraduate degree from the University of Vermont and his law degree magna cum laude from New York Law School, where he was associate editor of the Law Review. ALEXANDER A. TRUITT graduated cum laude from New York Law School, where he was a member of New York Law School’s Securities Arbitration Clinic and was awarded the school’s Public Service Certificate.

36 | January 2015 | NYSBA Journal POINT OF VIEW the largest arbitration forum in the United States, resolv- In order to ensure that the Florida Bar’s ruling is fol- ing disputes between customers and member firms, as lowed, FINRA Dispute Resolution requires that persons well as between employees and their brokerage firms. representing investors in Florida affirm in writing that The 60-page FINRA Code of Arbitration for Customer they are duly licensed to practice law or, alternatively, Disputes contains more than 80 rules, each with numer- that they are not receiving compensation for their ser- ous subparts.9 Many of these rules have been frequently vices. Additionally, FINRA requires that those affirming amended and contain further advisory notices. And the they are lawyers provide their state bar identification FINRA guidelines describe motion practice and discov- number. ery as “often complicated.”10 Aside from the complex nature of many FINRA arbi- The N.Y. Rules Do Not Govern Non-Attorneys trations, non-attorneys representing parties in FINRA The N.Y. Rules establish “the minimum level of conduct arbitration are not bound by the New York Rules of Pro- below which no lawyer can fall without being subject to fessional Conduct (N.Y. Rules).11 Other states with stat- disciplinary action” and are designed to “further the pub- utes similar to Judiciary Law §§ 478 and 484, relating to lic’s understanding and confidence in the rule of law.”16 the unauthorized practice of law, prohibit non-attorneys Failure to meet these responsibilities “compromises the from representing parties in FINRA arbitration for com- independence of the profession and the public interest pensation. that it serves.”17 In 1997, for example, the Florida Bar found that com- pensated non-attorney representation of investors in securities arbitration constitutes the unauthorized prac- Aside from the complex tice of law and enjoined non-attorneys from representing investors for compensation in securities arbitration pro- nature of many FINRA ceedings.12 The injunctive order applied to people who were not licensed to practice law in any jurisdiction and arbitrations, non-attorneys represented investors in securities arbitration for com- representing parties in FINRA pensation. The Florida Bar decision was narrowly crafted to eliminate non-attorney companies from soliciting and arbitration are not bound practicing in the state, while keeping in line with the public policy supporting arbitration as an efficient means by the New York Rules of to resolve commercial disputes. As the panel noted, Professional Conduct. “the services provided by nonlawyer representatives in the alternative but still adversarial context of securities arbitration constitutes the practice of law.”13 The Florida However, the N.Y. Rules govern only the conduct of Bar found that non-attorneys committed the unlicensed attorneys and have no bearing on non-attorneys repre- practice of law in at least 12 different areas during securi- senting parties in FINRA arbitration for compensation. In ties arbitrations.14 a 2010 article titled “Swatting at Wall St. From a Bunker Supporting that decision, the Florida Bar followed in Brooklyn,” the New York Times investigated the busi- State ex rel. Florida Bar v. Sperry, and found ness practices of non-attorney companies that represent in determining whether the giving of advice and coun- claimants for compensation in FINRA arbitration.18 The sel and the performance of services in legal matters for article revealed a litany of practices, which – if done by an compensation constitute the practice of law it is safe attorney – would constitute a violation of the N.Y. Rules; to follow the rule that if the giving of such advice and however, for a non-attorney these abusive practices go performance of such services affect important rights of unregulated.19 The most significant and systemic of these a person under the law, and if the reasonable protec- activities spanned the gamut from deceptive advertising tion of the rights and property of those advised and served requires that the persons giving such advice practices to charging excessive contingency fee contracts possess legal skill and a knowledge of the law greater for services and last-minute withdrawal of representa- than that possessed by the average citizen, then the tion. While the N.Y. Rules protect attorneys’ clients from giving of such advice and the performance of such this practice, it cannot protect clients of non-attorneys services by one for another as a course of conduct con- from this conduct.20 stitute the practice of law.15 The Sperry decision reflects the opinion that defining How Other States Look at the Issue what constitutes “legal practice” requires examining Judiciary Law §§ 478 and 484 do not explicitly allow non- the relationship between the attorney, the client and the attorneys to represent claimants in FINRA arbitration matter at issue, instead of the forum where the attorney for compensation; neither do they expressly prohibit the practices. practice. While it may seem logical that FINRA arbitration

NYSBA Journal | January 2015 | 37 POINT OF VIEW involves the practice of the law, another interpretation How to Resolve the Issue in New York allows non-attorneys to practice in FINRA arbitration for The issue of whether non-attorney representation of par- compensation because of the Judiciary Law’s failure to ties in FINRA arbitration for compensation constitutes explicitly include the practice under its construction of the unauthorized practice of law would be an issue of “legal services.”21 first impression for New York state courts.27 This issue Yet, the language of Judiciary Law §§ 478 and 484 is could come to the attention of the courts in four different not significantly different from the corresponding laws ways. of other states. The highest courts in Ohio, Arizona and First, the New York State Legislature could amend the Arkansas have all ruled that non-attorney representation language of Judiciary Law § 484 to include FINRA arbi- in arbitration constitutes the unlicensed practice of law.22 tration proceedings. Second, the Legislature could draft a As in New York, the Ohio law prohibits anyone who is more concrete definition of what constitutes legal services not licensed in the state from providing legal services.23 that includes representing parties in arbitration for com- However, in Ohio, legal services include representing pensation. Third, counsel facing a non-attorney in FINRA individuals in discovery, settlement negotiations and arbitration could move by order to show cause to enjoin pre-hearing conferences to resolve claims of legal liability, the unauthorized practice of law by the non-attorney regardless of the forum.24 In this respect, Ohio is different adversary. Finally, a party could challenge a contingent from New York in that it recognizes that dispute resolu- retainer fee with a non-attorney on the grounds that the tion before an arbitral forum, like FINRA, is the practice contract is unconscionable. of law and as such should be regulated in such forums, as well as in state and federal courts. Conclusion In Arizona, the Law on the Regulation of the Legal Adequate representation in FINRA arbitration involves Practices defines the practice of law as “representing legal practices that a growing number of states have another in a judicial, quasi-judicial, or administrative expressly recognized as legal in nature. While arbitra- proceeding or other formal dispute resolution proceeding tion is viewed as a private dispute resolution mecha- such as arbitration and mediation,” among other prac- nism, the power that state courts have to confirm or tices.25 In Arizona, the judiciary explicitly stated that legal vacate awards makes arbitration minimally a quasi- practice includes representation of parties before any legal proceeding. New York’s legislature drafted Judi- arbitral forums. As such, Arizona regulates the unauthor- ciary Law §§ 478 and 484 to protect the public from ized practice of law in arbitration, which likely applies to unscrupulous business practices by unskilled persons FINRA arbitration as well. performing legal services for pay. While New York New York’s Judiciary Law §§ 478 and 484 are most State has a strong public policy against interfering similar to the Arkansas Code Annotated § 16-22-211(a), with parties’ ability to decide their preferred forum for which has been applied by the Arkansas Supreme Court resolving conflicts, New York also has a strong public to prevent non-attorney officers from representing cor- policy against the unlicensed practice of law. Prevent- porations as pro se litigants in any “any court in this state ing non-attorneys from representing parties in FINRA or before any judicial body.”26 Even without clear textual arbitration for compensation will not place these two guidance, the Supreme Court of Arkansas in NISHA held policies in conflict with each other. ■ that arbitration proceedings bore “significant indicia” of legal proceedings and, as such, found a corporation could 1. See N.Y. Judiciary Law § 484 (Jud. Law). not represent itself, pro se, through non-attorney officers 2. Spivak v. Sachs, 16 N.Y.2d 163, 168 (1965); Jemzura v. McCue, 357 N.Y.S.2d 167, 168 (3d Dep’t 1974); Dacey v. New York County Lawyers’ Ass’n, 290 F. Supp. in an arbitral proceeding. 835 (S.D.N.Y. 1968); People v. Black,156 Misc. 516 (N.Y. Co. Ct., Otsego Co. All three state courts found, as did the Florida Bar, 1935). that of the representative activities necessary to compe- 3. Garas v. Grievance Comm. of the Eighth Jud. Dist., 65 A.D.3d 164 (4th Dep’t tent advocacy in FINRA arbitrations, including nego- 2009). tiating settlements, conducting discovery and drafting 4. People v. Wood, 151 Misc. 66 (Co. Ct., Broome Co. 1934). statements of claim, each constitutes legal services and 5. Roschko v. Roschko, 130 Misc. 2d 827, 829 (Sup. Ct. N.Y. Co. 1985). involves the significant practice of the law. These rul- 6. In re McDonald, 318 B.R. 37 (Bankr. E.D.N.Y. 2004). ings represent a growing understanding that arbitra- 7. Application of N.Y. Cnty. Lawyers Ass’n, 273 A.D. 524 (1st Dep’t 1948), aff’d, tion necessarily involves the practice of law. As such, In re Bercu, 299 N.Y. 728 (1949). the practice of non-attorneys representing claimants 8. See Jud. Law § 484; Jud. Law § 478 (practicing or appearing as attorney- at-law without being admitted and registered). in FINRA arbitration for compensation appears to 9. See FINRA Rule 12000, et seq. Code of Arbitration for Customer Dis- abrogate the legislative intent behind Judiciary Law putes (2007), http://finra.complinet.com/en/display/display_main. §§ 478 and 484. html?rbid=2403&element_id=4096&.

38 | January 2015 | NYSBA Journal POINT OF VIEW

10. See FINRA Dispute Resolution Arbitrator’s Guide at 27, 40 (2014), http:// 25. See Ariz. Sup. Ct. R. 31A(3). www.finra.org/web/groups/arbitrationmediation/@arbmed/@arbtors/ 26. Ark. Code Ann. § 16-22-211(a) (Supp. 2011). documents/arbmed/p009424.pdf . It shall be unlawful for any corporation or voluntary association to 11. See 22 N.Y.C.R.R. pt 1200 et seq. practice or appear as an attorney at law for any person in any court 12. Fla. Bar Re Advisory Opinion on Nonlawyer Representation in Sec. Arbitration, in this state or before any judicial body, to make it a business to 696 So. 2d 1178, 1180 (Fla. 1997). practice as an attorney at law for any person in any of the courts, to hold itself out to the public as being entitled to practice law, to ten- 13. Id. at 1183. der or furnish legal services or advice, to furnish attorneys or coun- 14. Those areas are: (1) advising investors as to whether or not they are com- sel, to render legal services of any kind in actions or proceedings of pelled to arbitrate under their investor-broker agreement; (2) advising inves- any nature or in any other way or manner, or in any other manner tors of the eligibility rules and statute of limitations for any potential claims; to assume to be entitled to practice law or to assume or advertise (3) advising investors as to the scope of the arbitrators authority; (4) advising the title of lawyer or attorney, attorney at law, or equivalent terms investors whether to settle the dispute before filing a claim; (5) advising in any language in such a manner as to convey the impression investors as to the merits of specific claims and defenses; (6) advising inves- that it is entitled to practice law or to furnish legal advice, service, tors whether attorneys or expert witnesses should be hired; (7) advising or counsel to advertise that either alone or together with or by or investors whether a petition to stay the arbitration should be filed; (8) advis- through any person, whether a duly and regularly admitted attor- ing investors on the possibility and merits of related or alternative civil ney at law or not, it has, owns, conducts, or maintains a law office actions; (9) conducting discovery including depositions; (10) oral advocacy or any office for the practice of law or for furnishing legal advice, including; presenting evidence, raising objections, examining witnesses and services, or counsel. voir dire of experts, preparing opening and closing arguments; (11) written 27. In Prudential Equity Grp., LLC v. Ajamie, 538 F. Supp. 2d 605, 612 (S.D.N.Y. advocacy including preparing and filing the initial written states of claims, 2008), the Southern District found that non-New York State licensed attorney answers, counter-claims, motions, and legal memoranda; (12) confirming, did not commit the unauthorized practice of law by representing a party in collecting or vacating and arbitral award. Id. at 1180–81. FINRA arbitration. That decision has since been interpreted as covering non- 15. Id. at 1182. attorney representation as well in dicta to a holding that arbitral immunity 16. See N.Y. Rules pmbl. (Apr. 2009), http://www.nysba.org/WorkArea/ applies to allegedly libelous statements made by non-attorneys in FINRA DownloadAsset.aspx?id=50671 (last visited Oct. 16, 2014). arbitration. See Depalo v. Lapin, No. 114656/2008, 2009 N.Y. Misc. LEXIS 5963, *6 (Sup. Ct., N.Y. Co. June 30, 2009) (New York has no prohibition preventing 17. Id. non-attorneys from representing parties in FINRA arbitration). However, the 18. Ariel Kaminer, Swatting at Wall St. From a Bunker in Brooklyn, N.Y. Times significant difference between the holding in Ajamie and the dicta in Depalo is (May 21, 2010), http://www.nytimes.com/2010/05/23/nyregion/23critic. that the Depalo court failed to recognize that all admitted attorneys are subject html. to the regulation of the bar they associate with and that regulation extends to their out-of-state activities. 19. In our opinion, the article suggested that two non-attorneys – one of which alleged that he was a former trader, but had no corresponding CRD indicating he was ever registered with FINRA; and the other, with a previous fraud conviction – had, in the past, misrepresented themselves as lawyers to at least one client. Additionally, in our reading, the article seemed to suggest that the non-attorneys took on the representation of claimants in FINRA arbitration without the intent to zealously prosecute their claims and, instead, sought to barter claims with opposing counsel for sub-nuisance-value settlements. The non-attorneys explicitly stated that they took half of any client our Foundation recovery. Furthermore, they utilized a trade name for their business and made further guarantees about future performance through the use of unveri- fied statistics. Finally, they cited to their complete lack of any legal training as The legal profession does so much to help so many. the reason why they were more suited than attorneys to represent claimants in FINRA arbitration. By contributing knowledge, time, funding and a passion for Yjustice; together we can have a meaningful impact in our com- 20. Rule 7.1 of the N.Y. Rules prohibits attorneys from making statements munities across the state. that are false, deceptive, or misleading. Even a truthful statement can be misleading when it omits necessary information. See N.Y. Rules 7.1 (2009). Comment 3 to Rule 7.1 gives an example where the phrase: “I have never lost a case” may be simultaneously truthful and misleading when every case that YYourour GGiftift MMatatteersrs attorney litigated has ended through a settlement. See N.Y. Rules 7.1, cmt. [3] (2009). Rule 1.5 of the N.Y. Rules governs attorney fees and prohibits attor- If NYSBA members contributed just $30 to The Foundation, over neys from charging excessive fees for their services. See N.Y. Rules 1.5. Finally, $2 million would be available to expand legal community efforts. N.Y. Rules Rule 1.16 prohibits attorneys from withdrawing from a case when When you make your gift to The New York Bar Foundation, you join their withdrawal will have a materially adverse effect on their client without with lawyers and others who share in our conviction that we must first showing good cause. See N.Y. Rules 1.16; see also J.M. Heinike Assocs., Inc. work together to bring equal access to justice to all New Yorkers. v. Liberty Nat’l Bank, 142 A.D.2d 929 (4th Dep’t 1988). 21. Jud. Law §§ 478, 484. 22. See NISHA, LLC v. TriBuilt Constr. Grp., LLC, 2012 Ark. 130 (Ark. 2012) (a Please give today. Call us at 518-487-5651 or non-lawyer employee’s representation of a corporation in an AAA arbitration give on-line at http://www.tnybf.org/donation proceedings constitutes the unauthorized practice of law); Disciplinary Counsel v. Alexicole, Inc., 105 Ohio St. 3d 52 (Ohio 2004) (neither a corporation, nor its non-attorney representative may represent individuals in securities arbitration); In re Creasy, 198 Ariz. 539 (Ariz. 2000) (a disbarred attorney’s representation of his client in an arbitration with an insurer constituted the unlicensed practice of law). 23. See Ohio Gov. Bar. Rule VII § 2(A)(1). Lawyers caring. Lawyers sharing. Around the corner. Around the state. 24. Ohio State Bar Ass’n v. Kolodner, 103 Ohio St. 3d 504 (Ohio 2004).

NYSBA Journal | January 2015 | 39 CONTRACTS BY PETER SIVIGLIA

Peter Siviglia is an attorney in Tarrytown, NY. He is the author of Commercial Agreements: A Lawyer’s Guide to Drafting and Negotiating, West 2014 (supplemented annually), and Writing Contracts: A Distinct Discipline, Carolina Academic Press.

Writing Contracts: Suggestions for Law Schools and Young Attorneys

Preface and found out they had no idea Mr. Jenkins and The Wall Street Journal My wife, the English teacher, once what it meant. Indeed, I have article observed. said, “In this world, Peter, there are just finished litigating one such two forms of writing: Creative, such case. The litigation did no one Contract Formation as novels, plays and poetry; and any good and would not have Any course or group of courses that Expository such as treatises, letters, happened but for some sloppy teach contract writing must include 2 memoranda and briefs.” This author drafting. a study of those laws and principles * * * has tried both, but prefers a third: that bear on contract formation, for a Muddied prose can have Contracts, which do not entertain, do real costs. In one of the few contract is nothing if it is not enforce- not convey information or ideas, and attempts to calculate the impact, able. An awareness of these rules is do not try to persuade. a Harvard Law School study fundamental, lest the draftsman sink The English teacher now agrees years ago suggested that a quar- piles into sand. A former partner that there are, indeed, three forms of ter of all contract disputes arose – yes, a partner – closed a secured writing. And that the third, Contracts, because of poor drafting.3 financing in the erroneous belief that a is a distinct discipline. The balance of the article from Uniform Commercial Code financing Unfortunately, the writing of con- which this last piece is taken goes on statement also constituted the security tracts has been sorely neglected by to suggest content that could com- agreement required by the Code. law schools, perhaps, in part, because prise the body of one or more courses However, a detailed knowledge of teaching writing is a labor-intensive on contract writing. It also contains these legal considerations is not nec- exercise; and perhaps, in part, because suggestions that young practicing essary. This would be in the nature of a course in this discipline would best attorneys might find useful. a survey – or perhaps, to some extent, be taught by lawyers practicing in a recapitulation of lessons learned in the commercial, transactional field. What Is a Contract? other courses – in order to establish Consequently, the criticisms of this In the beginning, to write a proper an alertness to those requirements of neglect are numerous, and the conse- contract, the student must first under- the law to which the contract must quences are significant. For example: stand intellectually and then appreci- conform in order to assure its enforce- It should not be surprising to ate viscerally what a contract really ability. The course should instill a practicing lawyers that new is. “An agreement between or among knowledge of the basics and a sensi- associates come to work with- two or more persons” provides but a tivity to know when they are appli- out the slightest idea about how bare hint. Precisely, a contract is sim- cable to the job at hand. to draft a contract. . . . [I]f you ply a set of instructions for a trans- “Consideration,” the quid pro quo, assign them a contract to draft, action (the purchase of real estate), the basic element in the universe of they will freeze like a deer in your headlights.1 or for a relationship (a partnership), contracts, is the place to start: What * * * or for a combination of the two (a constitutes proper consideration and, . . . I have been shocked by the partnership to purchase and develop perhaps more important, what does number of times in litigation real estate). It is no different from the not; and what contracts do not require that I have asked more senior plans and specifications to build a consideration.4 lawyers – including some fair- bridge. And if there is a flaw in those Next explore the “Statute of ly good lawyers – to explain plans or specifications, problems will Frauds,” beginning, perhaps, with the meaning of some provision arise – in the case of a contract, a table § 2-201 and § 2A-201 of the UCC, in a document they prepared set for the litigators, as the letter from and then move on to other statutory

40 | January 2015 | NYSBA Journal provisions such as Titles 7 and 11 of Well, under applicable corporate tain that requirement. Of course, the Article 5 and Title 3 of Article 15 in the law, the company could not buy back guarantor argued that Brazilian law General Obligations Law, which deal its shares. It was illegal. The company governed the guarantee. The plain- with various requirements bearing on could only buy its shares from surplus. tiff-beneficiary argued that New York the enforceability of a contract. The lawyer for the shareholders law governed. The Court of Appeals Then, make several other stops agreed. However, if he had done his held that “New York substantive along the UCC: Articles 2 (Sales) and research or asked an expert during law” governed and, accordingly, that 2A (Leases), which emphasize the the original transaction, he would the guarantee was enforceable. So, warranty and disclaimer of warranty have focused on the legal requirement what’s the point? That the choice of requirements; Article 3, which focuses that redemptions be made only from law clause prevailed? Well, there are on the requirements for negotiable surplus, and he might have insisted at least two other points. instruments; and Article 9 and its on a guarantee from the parent com- First: Though the plaintiff prevailed, requirements for a proper security pany, that is, the buyer of Fiddley the plaintiff’s lawyer could have easily agreement. If time allows, make a Dee; or he might have arranged the avoided the lawsuit at far less cost to brief stop at Article 5 (Letters of Cred- put to the parent company rather that the client by consulting with Brazilian it) and the ICC Uniform Customs and to Fiddley Dee. (For those curious of counsel regarding the enforceability Practice for Documentary Credits and the outcome, the issue was resolved of the guarantee and requiring proper its rules for Standby Credits. amicably by an alternate, deferred authorization by the board. Failure to In the discussion of UCC Article compensation arrangement.) consult with local counsel could well 9, emphasize the need to understand In Contracts, Know Your Limitations. constitute malpractice. each transaction and its collateral As Dirty Harry observed in Magnum Second: Assume that the winning before carefully examining the Code Force: “A man’s got to know his limi- plaintiff has to enforce the guarantee to determine what must be done to tations.” This is important in com- in Brazil because that is where the perfect the security interest. Avoid the mercial practice. Law students must assets of the guarantor reside. Will the details of perfection, for Article 9 of made be aware that when working Brazilian courts honor the New York the Uniform Commercial Code rivals on a transaction in a foreign state or ruling or will they find, instead, that the Internal Revenue Code in com- other foreign jurisdiction, counsel in enforcing an instrument “void” under plexity. It is a conundrum that must that state or other jurisdiction must be Brazilian law is against public policy, be solved transaction by transaction. consulted. The transaction involved and, therefore, deny collection? For Of course, other legal requirements in IRB-Brasil Resseguros, S.A. v. Inepar example, just reverse the situation: apply to contract formation such as Investments, S.A.,5 addressed by the Section 505 of the New York Busi- employment law, corporate law, tax New York Court of Appeals in a 2012 ness Corporation Law requires, with considerations, real estate law, . . . and decision, provides an excellent study certain exceptions, that the board of straight on ‘til morning. So students of this too-often overlooked mandate. directors of a corporation fix the con- must be made aware that, when they IRB-Brasil Resseguros, S.A. involved sideration, terms and conditions of find themselves outside their area of a conflict of laws issue to which the any option to acquire shares of that expertise, they must consult with col- court applied § 5-1401 of the General corporation. Thus, it is the stated leagues who have expertise in those Obligations Law. That section per- policy of New York that an option areas. For example, a client called one mits parties to a contract involving issued in violation of that require- day and said, “We have a problem, at least $250,000 to select New York ment is unenforceable. Would the Peter. When we bought Fiddley Dee as the governing law. The plaintiff New York courts, then, enforce a for- Company [at that time my client was had brought suit to enforce payment eign judgement declaring enforceable represented by another attorney], we under a guarantee issued by a Brazil- an option on which the board of gave the sellers rights to buy shares in ian guarantor. The guarantee con- directors had been required to act Fiddley Dee; and we also gave them the tained a New York choice of law and had not acted? That is a risk no right to sell those shares back to Fiddley clause. An agency agreement that attorney should take. Dee simultaneously with the purchase. applied to both the guarantee and The sellers have exercised both options, the guaranteed debt stated that both Elements of Basic Contracts the buy and the put, but it will cripple “shall be governed by, and construed Following their education in the legal Fiddley Dee to buy back the shares.” in accordance with, the laws of the considerations in drafting contracts, The fact was that Fiddley Dee had State of New York,” without regard to introduce the students to the con- lost money for many years, but was conflict of laws principles. siderations involved in certain basic now quite profitable. The formula to Under Brazilian law, the guarantee contracts such as a promissory note, determine the buy-back price was was “void” because it was not autho- a guarantee, security agreements, based on those recent earnings. Fiddley rized by the guarantor’s board of employment contracts, shareholder Dee still had an accumulated deficit. directors. New York law does not con- arrangements, the sale and purchase

NYSBA Journal | January 2015 | 41 of goods, acquisitions, leases, licenses without the written consent of collaboration should add perspec- and options. the other except that either party tive, which is essential to the drafting may, without the consent of the process, helping to produce a better Boilerplate other, transfer its rights and obli- product and, more important, help- The term “boilerplate” refers to claus- gations hereunder to a successor ing to develop and improve tech- es commonly and variously included to all or substantially all of its nique and skills more quickly. in most contracts. But the use of that business and assets. Any transfer A variation on this approach is term is misleading and dangerous or assign-ment in violation of the to have the teams prepare different because it carries with it a prejudice requirements of this paragraph assignments which would be present- that these clauses need little or no will be null and void. ed at different times during the course. scrutiny when added to a contract. • Licensee may not transfer or Copies of completed assignments Not a clause or a form exists, how- assign any of its rights under would be distributed to the other stu- ever, that can or should be added to a this agreement without Licen- dents for comment during class ses- contract without critical examination sor’s written consent. sions. The object of this critique is to determine whether any changes are • Licensor may not transfer or not to attack and defend. The goal is needed; virtually always, changes are assign any of its rights under to determine whether the agreement needed in order to adapt the provi- this agreement without Licens- adequately and comfortably houses sion to fit properly to the deal. Below ee’s written consent except that the transaction and whether the con- is a list of some of these clauses. Licensor may transfer and assign struction work (i.e., the drafting) is 1.1.1 Termination its rights and obligations under sound, and then to decide how best 1.1.2 Assignment this agreement to any trans- to correct any deficiencies. Guidance 1.1.3 Governing Law feree of the intellectual property by the teacher in these discussions 1.1.4 Arbitration licensed hereunder, and licensor will be essential to focus attention on 1.1.5 Notice may assign its rights to the roy- critical issues and to avoid digressions 1.1.6 Amendment alties under this agreement. Not- into minutia. My wife has sucessfully 1.1.7 Waiver withstanding any such permitted used a similar technique in her writing 1.1.8 Warranties transfer or assignment, Licensor classes. She has observed that mean- 1.1.9 Indemnities will remain liable for its obliga- ingful comments from peers often 1.1.10 Remedies tions under this agreement. carry greater weight with students By way of example, below are a • Any transfer or assignment in than those from teachers. few simple variations on assignment violation of the requirements of In contracts, there is either good clauses; but, as noted above, any one this section will be null and void. writing or bad writing. And if the of these variations is subject to modi- writer properly executes the prime fication based on the particulars of Drafting Exercises directive – that is, accuracy stated as the transaction being addressed. Finally, we get to drafting – what this simply as possible – the writing will • Neither party may transfer or course is all about. And an under- be good. But if the writer fails to exe- assign any of its rights or obli- standing of the basics discussed cute the prime directive, that writer gations under this agreement above provides the foundation to the will be setting the stage for litigation. without the written consent of writing phase. the other, and any transfer or Again: A contract is no more than Ethical Considerations assignment without such consent a set of instructions. The prime direc- Even the discipline of contract prepara- will be null and void. tive in writing any contract is “accu- tion engenders ethical considerations. • Neither party may transfer or racy stated as simply as possible.” One of these is the mandate that assign any of its rights or obliga- Accuracy, though, must be the con- the draftsman prepare a fair agree- tions under this agreement with- trolling feature, for sometimes the ment. The reasons are simple: out the written consent of the concepts are so complex – not due to • a one-sided contract – especially other. A merger or consolidation, the lawyer, but due to the deal con- when the bargaining positions are regardless of which participant cocted by the client – that simplicity relatively equal – will invariably therein is the surviving entity, in the purest sense is not possible. be negotiated back to the middle; will constitute a transfer. Any Because teaching the writing seg- • an even-handed contract will transfer or assignment in viola- ment of the course is so labor inten- result in minimal, non-confron- tion of the requirements of this sive, a procedure that might prove tational negotiation and a quick paragraph will be null and void. helpful and productive is for two conclusion of the deal; • Neither party may transfer or or three students to work together • an even-handed contract, raising assign any of its rights or obli- on assignments, especially the lon- few issues, will result in less cost gations under this agreement ger and more complex ones. Their to the client in terms of legal fees.

42 | January 2015 | NYSBA Journal That’s right, lower legal costs. And “The Company will pay the follow- benefit unless we writers have the yes, that’s good; and it’s also right. ing expenses . . .” vs. “The Company ability to apply it properly. Between The lawyer is a fiduciary and, as a will not pay the following expenses . expository writing, like this article, fiduciary, the lawyer owes a duty to . . “ Do unto the other lawyer as you and a contract, the objective is the the client to keep those legal fees on would have that lawyer do unto you. same: “accuracy stated as simply as a diet. Those lawyers with high IQs In the context of a commercial possible.” To achieve that objective, (“I” for Integrity and “Q” for Quality transaction, I doubt there is no bet- the writer must have a command of of Performance) will not have to pan- ter application of the Golden Rule the language. While the responsibility handle for lunch. The Clint Eastwood than this: correct the drafting errors for teaching students a command of character in the movie In the Line of of the other attorney. In fact, because the language should not be the job of Fire, a Secret Service agent assigned to the object of a contract is to reflect the law school – it is the responsibility protect the President, teaches us this accurately the intent of all parties, of the primary and secondary schools lesson: The client comes first. this principle is the ethical equivalent and, to a lesser extent, the responsi- A second ethical principle is, There of the “given” in geometry. Allow- bility of the colleges – if those forma- is no shame in helping the other guy. ing errors that one detects to remain tive institutions did not succeed, law Commercial transactions should not uncorrected serves a perverse desire schools and the other institutions of be adversarial proceedings. The goal to gain an improper advantage and higher learning must. ■ is not to win; the goal is to create. The opens the door to possible litigation. goal is to do a deal that conforms to The client is ill-represented by that 1. Lewis, Turning the Firm into a School, Business L. Today, Vol. 15, No. 3 (Jan./Feb. 2006) (American Bar the intent of the parties. Thus, while type of practice. Association). Mr. Lewis is a law school teacher. attorneys must at all times represent 2. Letter from Stephen E. Jenkins to the author, the interests of their clients, attor- A Final Thought September 13, 1993. Mr. Jenkins is a trial lawyer with neys must not seek to gain an advan- Ezra Pound once observed that the Ashby & Geddes in Wilmington, Delaware. tage contrary to the terms of the deal English language is the best language 3. Richard B. Schmitt, Lawyers and Clients, Law Schools, Firms Sending a Message: Polish Your Prose, because of a mistake by the other in which to write. Wall St. J., Aug. 28, 1995, p. B3. lawyer. An obvious example – and Though we, here, may have the 4. See, e.g., N.Y. Uniform Commercial Code, § 2-205 surely one that begs correction – is best verbal means of communication (UCC); N.Y. General Obligations Law, §§ 5-1101–1115. the inadvertent omission of a word: on the planet, that facility is of little 5. 20 N.Y.3d 310 (2012).

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NYSBA Journal | January 2015 | 43 LEGAL RESEARCH BY AMY A. EMERSON

AMY A. EMERSON is Associate Director for Administration & Access Services, Lecturer in Law at Cornell Law Library. Ms. Emerson earned joint J.D. and M.L.S. degrees with honors from Syracuse University School of Law and Syracuse University School of Information Studies. She teaches several advanced courses in legal research, as well as the research component of the first-year Lawyering course.

The Uniform Electronic Legal Material Act in New York

he trend among state govern- but the drafters recognized that their trustworthy copies of the law on ments is to move the publica- inclusion may, in some cases, create a which they can rely.13 So important tion of primary legal materials separation of powers issue between is authentication, the Bluebook prefers T 1 online. This development will pro- the state legislature and the judicial a cite to an authentic authority before vide more transparency and allow branch.6 an official authority when one must for the timely and cost-effective dis- Electronic legal materials des- choose between the two.14 tribution of information; however, it ignated as official are covered by Under the Act, a party who con- also raises several concerns regarding the UELMA.7 Also covered are any tests the authentication of legal mate- the trustworthiness of the material. materials that were not previously rial bears the burden of proof.15 In The legal community and the public designated as official, but the print addition, states that enact the UELMA at large must be able to rely on the option for which was eliminated after enjoy a presumption by every other law being accessible, authenticated, a state’s enactment of the UELMA.8 state that has enacted the UELMA and preserved for the future, but In these instances, the electronic ver- that their official electronic legal these essential qualities are frequently sions must comply with the terms of material is accurate and unaltered.16 lacking from electronic government the Act. The second requirement of the publications. Without a framework to The UELMA does not require states UELMA is preservation. The Act protect digital material, the principle to publish legal materials electroni- recognizes the importance of retain- of open government suffers. cally,9 and it does not apply retroac- ing yesterday’s legal materials that The Uniform Law Commission tively to materials published before remain relevant to the outcome of offers a solution through the Uni- its enactment.10 current legal disputes.17 It therefore form Electronic Legal Material Act The UELMA explicitly notes that it provides that material governed by (UELMA). The UELMA was com- does not deal with copyright issues, the Act be preserved and secured.18 pleted by the National Conference affect or supersede rules of evidence, States may choose to do so in print of Commissioners on Uniform State affect existing state law regarding or electronic format.19 If done in Laws in 20112 and approved by the the certification of print materials, or electronic format, then the pub- American Bar Association House of interfere with the contractual relation- lisher must “ensure the integrity of Delegates in 2012.3 It provides stan- ship between a state and its commer- the record; provide for backup and dards for the authentication, pres- cial publishers.11 disaster recovery of the record; and ervation and accessibility of offi- ensure the continuing usability of the cial electronic legal publications by UELMA Standards material.”20 These outcomes may be requiring that such online materials The first requirement of the UELMA accomplished through several mea- meet the same standards to which is authentication. The Act defines an sures, including maintaining multiple print materials have been held.4 authentic document as “one whose copies, storing the copies in sepa- The UELMA defines legal material content has been verified by a gov- rate geographic and administrative as session laws, codified or consoli- ernment entity to be complete and locations, and migrating materials to dated laws, agency rules and deci- unaltered.”12 In other words, authen- new storage platforms as technology sions having the effect of law, and tication verifies not only the content evolves.21 the state constitution.5 Reported deci- of a document but also validates the Finally, the UELMA requires that sions and court rules are also rec- source of the file, thereby provid- material subject to the authentication ommended for inclusion by the Act, ing attorneys and the public with and preservation requirements of the

44 | January 2015 | NYSBA Journal Act be made accessible. Specifically, it York chooses to designate those elec- Support for the UELMA must be made “reasonably available” tronic decisions as official. in New York to the public on a permanent basis.22 According to Richard Long, chair States have discretion to determine Cost of New York’s Uniform State Laws what is reasonable, but the standard Eight of the 12 states that have enact- Commission, the Commission has should be made consistent with other ed the UELMA did so with no fiscal listed the UELMA in its Annual state practices.23 impact.31 Typically, this was because Legislative Report as an Act that it the states determined that they will seek to have introduced in New Who’s Enacted the UELMA could meet the requirements of the York in 2015. Commissioner Long To date, the UELMA has been enact- UELMA without additional funds. elaborates, “New York’s Uniform ed in 12 states, including California, Some, such as Minnesota, were able Law Commissioners strongly sup- Colorado, Connecticut, Delaware, to use their current staff and existing port the enactment of UELMA in our Hawaii, Idaho, Illinois, Minnesota, information technology support to state. The Act enhances New Yorkers’ Nevada, North Dakota, Oregon, and create a prototype for an authentica- online access to authenticated state Pennsylvania.24 The UELMA has tion system.32 law through a technologic-neutral additionally been introduced else- Those states that have experienced approach.”41 where, including Massachusetts and a fiscal impact have managed to keep In addition, the Law Library Asso- the District of Columbia.25 costs low thus far. For example, North ciation of Greater New York42 and Dakota projects spending $115,000 the Association of Law Libraries of Current Publication of Official for the 2013–2015 biennium. Of this Upstate New York43 have both offi- Materials in New York amount, $85,000 is attributable to one- cially endorsed the enactment of the At the same time that New York time software development costs, and UELMA in New York. is a leader in providing substantial the remaining $30,000 is attributable online access to electronic copies of to ongoing costs each biennium.33 Why New York Needs its legal publications, it also con- In another instance, the District the UELMA Now tinues to maintain a robust system of Columbia has chosen to use open New York is actively turning to elec- of print publication through which source software34 to authenticate the tronic publishing of its legal materi- nearly all of its official materials are D.C. Code and Statutes at Large, and als. Not only are some cases now produced. estimates that the cost to do so may being published exclusively online, For example, the Laws of New York, total less than $2,000 per year.35 but voters approved a ballot proposal prepared by the New York Legisla- in November 2014 to amend Article tive Bill Drafting Commission, are Technology III, § 14, of the New York Constitu- statutorily required to be published in The value of the UELMA is furthered tion to “allow electronic distribution printed bound volumes.26 Moreover, by its flexibility. It is technology-neu- of a state legislative bill to satisfy the certification of session laws and con- tral,36 thereby allowing each state to constitutional requirement that a bill solidated and unconsolidated laws choose the most appropriate option be printed and on the desks of state is limited to print only.27 Similarly, for the multiple entities responsible legislators at least three days before administrative codes, rules, and regu- for publication, as well as account for the Legislature votes on it.”44 lations are certified by the Secretary the existing information technology The measure is an important one of State in print.28 structure. that will save significant amounts Judicial decisions have traditional- Authentication is typically evi- of money and paper. Logistically, it ly been required to be published and denced by electronic signature or directs that bill text may not be mod- printed in bound volumes;29 how- digital watermark, but may also be ified “without leaving an adequate ever, this requirement is evolving. accomplished through hashing algo- record thereof,”45 but unfortunately The State Reporter recently began an rithms, transient key technology, and does not include any explicit terms initiative, approved by the Court of other means.37 for authentication or permanent Appeals, to publish a limited number Many attorneys are familiar with preservation of the new electronic of trial court decisions exclusively the authentication process used by bills. online, with only an abstract pub- the U.S. Government Printing Office, New York is rightly moving for- lished in the Advance Sheets.30 It is which applies digital signatures to ward to embrace the digital age. possible that this is an example of PDF documents using a digital cer- Introducing the UELMA now will an area of publication that may be tificate.38 This is only one option and allow for passage of the Act in a immediately impacted by passage of other locations, such as Minnesota39 thoughtful and deliberate manner the UELMA in New York, if judicial and the District of Columbia,40 have that meets the unique needs of our materials are included in New York’s chosen alternative technologies that state while ensuring that the transi- version of the UELMA, and if New better suit their needs. tion to electronic publication is done

NYSBA Journal | January 2015 | 45 11. Unif. Elec. Legal Material Act, Prefatory 29. Judiciary Law § 433-a. well. The result will be a trustworthy Note 7A U.L.A. 227 (Supp. 2011), http://www. 30. New York Official Reports – Frequently Asked system of official electronic publica- uniformlaws.org/shared/docs/electronic%20 Questions, State Reporter, http://www.courts. tion on which everyone can rely. ■ legal%20material/uelma_final_2011.pdf. state.ny.us/reporter/Faq.htm (last visited Nov. 25, 12. Matthews, et al., supra note 1, as cited in Unif. 2014). 1. Richard J. Matthews, et al., State-by-State Report Elec. Legal Material Act, Prefatory Note 7A U.L.A. 31. Uniform Electronic Legal Material Act – on Authentication of Online Legal Resources, Am. 227 (Supp. 2011), http://www.uniformlaws.org/ Enactments, Am. Ass’n of Law Libraries, http:// Ass’n of Law Libraries (Mar. 2007), http://www. shared/docs/electronic%20legal%20material/ www.aallnet.org/Documents/Government- aallnet.org/Documents/Government-Relations/ uelma_final_2011.pdf. Relations/UELMA/UELMAenactments.pdf (last authen_rprt/authenfinalreport.pdf (“Key Finding 13. Unif. Elec. Legal Material Act, §5, 7A U.L.A. updated Sept. 25, 2014). 1: States have begun to discontinue print official 234 (Supp. 2011), http://www.uniformlaws.org/ 32. Office of the Revisor of Statutes, Prototype legal resources and substitute online official legal shared/docs/electronic%20legal%20material/ for Authentication of Official Electronic Record and sources.”). uelma_final_2011.pdf. Pricing, Minnesota Legislature (Aug. 2012), http:// 2. The National Conference of Commissioners on 14. The Bluebook: A Uniform System of Citation www.aallnet.org/Documents/Government- Uniform State Laws, Electronic Legal Material Act, R. 18.2.1(a)(ii), at 166 (Columbia Law Review Ass’n Relations/UELMA/MNAuthPrototype082012.pdf Unif. Law Comm’n, http://www.uniformlaws. et al. eds., 19th ed. 2010). 33. Uniform Electronic Legal Material Act – org/Act.aspx?title=Electronic+Legal+Material+Act 15. Unif. Elec. Legal Material Act, §6, 7A U.L.A. Enactments, Am. Ass’n of Law Libraries, http:// (last visited Nov. 25, 2014). 235 (Supp. 2011), http://www.uniformlaws.org/ www.aallnet.org/Documents/Government- shared/docs/electronic%20legal%20material/ Relations/UELMA/UELMAenactments.pdf (last 3. House of Delegates, Resolution, Am. Bar Ass’n uelma_final_2011.pdf. updated Sept. 25, 2014). (Feb. 6, 2012), http://www.americanbar.org/ content/dam/aba/directories/policy/2012_hod_ 16. Id. 34. Data Seal, GitHub, https://github.com/ midyear_meeting_102b.doc. 17. Unif. Elec. Legal Material Act, §7 cmt, 7A unitedstates/authentication (last visited Nov. 25, 2014). 4. Unif. Elec. Legal Material Act, Prefatory Note U.L.A. 236 (Supp. 2011), http://www.uniformlaws. 7A U.L.A. 225-228 (Supp. 2011), http://www. org/shared/docs/electronic%20legal%20material/ 35. Telephone Interview with V. David Zvenyach, uniformlaws.org/shared/docs/electronic%20 uelma_final_2011.pdf. Unif. Law Comm’r (Nov. 19, 2014). legal%20material/uelma_final_2011.pdf. 18. Unif. Elec. Legal Material Act, §7, 7A U.L.A. 36. Uniform Electronic Legal Material Act, § 5 5. Unif. Elec. Legal Material Act, §2, 7A U.L.A. 236 (Supp. 2011), http://www.uniformlaws.org/ cmt, 7A U.L.A. 234 (Supp. 2011), http://www. 229 (Supp. 2011), http://www.uniformlaws.org/ shared/docs/electronic%20legal%20material/ uniformlaws.org/shared/docs/electronic%20 shared/docs/electronic%20legal%20material/ uelma_final_2011.pdf. legal%20material/uelma_final_2011.pdf. uelma_final_2011.pdf. 19. Id. 37. Anna Russell & Jane Larrington, Authenticating 6. Unif. Elec. Legal Material Act, §2 cmt, 7A 20. Id. the John Hancock of Online Primary Legal Materials, AALL Spectrum, June 2013, at 17, http:// U.L.A. 230 (Supp. 2011), http://www.uniformlaws. 21. Unif. Elec. Legal Material Act, §7 cmt, 7A www.aallnet.org/mm/Publications/spectrum/ org/shared/docs/electronic%20legal%20material/ U.L.A. 237 (Supp. 2011), http://www.uniformlaws. Archives/vol-17/No-8/digital-authentication.pdf. uelma_final_2011.pdf. org/shared/docs/electronic%20legal%20material/ For a specific example of how a state authenticated 7. Unif. Elec. Legal Material Act, §3, 7A U.L.A. uelma_final_2011.pdf. its legal materials, see Konya Lafferty, Revisor 232 (Supp. 2011), http://www.uniformlaws.org/ 22. Unif. Elec. Legal Material Act, §8 7A U.L.A. Michele Timmons and the Minnesota In-House shared/docs/electronic%20legal%20material/ 238 (Supp. 2011), http://www.uniformlaws.org/ UELMA Authentication System, Chicago Ass’n uelma_final_2011.pdf. shared/docs/electronic%20legal%20material/ of Law Libraries (Mar. 6, 2014), http://new. 8. Unif. Elec. Legal Material Act, §3 cmt, 7A uelma_final_2011.pdf. chicagolawlib.org/blog/2014/03/06/revisor- U.L.A. 232 (Supp. 2011), http://www.uniformlaws. 23. Unif. Elec. Legal Material Act, §8 cmt 7A michele-timmons-and-the-minnesota-in-house- org/shared/docs/electronic%20legal%20material/ U.L.A. 238-239 (Supp. 2011), http://www. uelma-authentication-system/. uelma_final_2011.pdf. uniformlaws.org/shared/docs/electronic%20 38. Authentication Information, U.S. Government 9. Unif. Elec. Legal Material Act, §4 cmt, 7A legal%20material/uelma_final_2011.pdf. Printing Office, http://www.gpo.gov/ U.L.A. 232 (Supp. 2011), http://www.uniformlaws. 24. Uniform Electronic Legal Material Act – authentication/ (last visited Nov. 25, 2014). org/shared/docs/electronic%20legal%20material/ Enactments, Am. Ass’n of Law Libraries, http:// 39. Document Authentication, Minnesota uelma_final_2011.pdf. www.aallnet.org/Documents/Government- Legislature – Office of the Revisor of Statutes, 10. Unif. Elec. Legal Material Act, §3, 7A U.L.A. Relations/UELMA/UELMAenactments.pdf (last https://www.revisor.mn.gov/pubs/publish_hash. 232 (Supp. 2011), http://www.uniformlaws.org/ updated Sept. 25, 2014). php?type=rules&rule_type=part&id=7890.0100 shared/docs/electronic%20legal%20material/ 25. Uniform Electronic Legal Material Act – 2014 (last visited Nov. 25, 2014). uelma_final_2011.pdf. Bill Tracking Chart, Am. Ass’n of Law Libraries, 40. Data Seal, GitHub, https://github.com/ http://www.aallnet.org/Documents/Government- unitedstates/authentication (last visited Nov. 25, Relations/UELMA/uelmabilltrack2014.pdf (last 2014). updated Sept. 25, 2014). 41. E-Mail from Richard Long, Chair, N. Y. Unif. 26. N.Y. Legislative Law §§ 44–44-a. Law Comm’n, to author (Nov. 12, 2014, 9:02AM 27. N.Y. Public Officers Law § 70-b. EST) (on file with author). 28. N.Y. Executive Law § 106. 42. Letter from William R. Mills, President, Law Library Ass’n of Greater N.Y., to Richard B. Long, Unif. Law Comm’r (October 2, 2012), http:// aallnet.org/Documents/Government-Relations/ ChapterLetters/lt100212llagny.pdf. 43. A Resolution to Support the Uniform Electronic Legal Material Act in the State of New York, Ass’n of Law Libraries of Upstate N.Y. (Oct. 19, 2014), http://www.aallnet.org/chapter/alluny/ UELMA%20Resolution.pdf. 44. Proposal Number Two – Permitting Elec. Distrib. Of State Legislative Bills, N.Y. State Board of Elections, http://www.elections.ny.gov/NYSBOE/ Elections/2014/Proposals/ProposalTwoFinal.pdf. 45. Id.

46 | January 2015 | NYSBA Journal NEW YORK STATE BAR ASSOCIATION Legal Manual for New York Physicians Fourth Edition

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Order multiple titles to take advantage of our low ﬂ at rate shipping charge of $5.95 per order, regardless of the number of items shipped. $5.95 shipping and handling offer applies to orders shipped within the continental U.S. Shipping and handling charges for orders shipped outside the continental U.S. will be based on destination and added to your total. Prices do not include applicable sales tax. Mention code: PUB2850 when ordering. LAW PRACTICE MANAGEMENT BY CHAD E. BURTON

CHAD E. BURTON is the founder of Burton Law, one of the leading virtual law firm structures. Formerly in a big law firm, he now represents technology-oriented companies from startups to multi-national corporations. Additionally, he started CuroLegal, an outsourced practice management company for lawyers.

The Virtual Law Firm

ewind four or five years, and how to practice law is the result marketplace, firms should be able to when the concept of virtual of the technology that is playing a provide services to clients in differ- Rlaw firms still fell into the growing and significant role in law ent jurisdictions. This means that law category of new-agey business mod- firm operations. The barrier to start- firms have to engage in changes that els. Now, the emerging virtual law ing a practice is lower, regardless of go beyond cutting hourly rates or firm models are front and center to years of experience. considering alternative fee structures any future-of-the-profession conver- To understand these emerging in their efforts to keep their clients sation. (And people say the legal business models and their role in with them. This will just reduce the market is slow to evolve.) Virtual law the future of the profession, consid- top side of the revenue stream. Law firms provide sophisticated services, er these three important questions: firms need to address the expense and real clients are served, ranging (1) What is driving such a change side. from large corporate clients to indi- in operations?; (2) What are core This is where emerging business viduals. concepts for lawyers to consider models, such as virtual law firms, The concept of virtual law practice in developing such a model?; and can help through structuring effective originated in the solo-practice world (3) Where should lawyers look for work environments that have lower where lawyers had begun serving cli- help? overhead. Think about these ques- ents through a website and an online tions: client portal. Providing unbundled Whose Idea Was This Anyway? • Do your clients care where you legal services to a segment of the Answer: Consumers of legal services. produce their actual work prod- population that would not necessar- At this point it should be no mys- uct? ily want to meet face-to-face with a tery to any lawyer that the legal mar- • Do your clients care whether the lawyer (or who could not afford tra- ketplace has changed. Client expecta- lawyers and staff for a firm are ditional services) is a good thing. In tions have changed and will continue all under one roof? fact, in early 2013, the American Bar to evolve. People much smarter than • Do your clients care whether Association approved a resolution this author – Richard Susskind, Jor- your meeting space is rented supporting the delivery of unbundled dan Furlong and Stephanie Kimbro, from a shared office model such legal services. to name just a few – have been as Regus? And the virtual arena is expanding explaining the future of the profes- • Do your clients care if your to multi-lawyer law firms. Take your sion for quite some time. They all administrative help is out- traditional brick-and-mortar office, discuss imminent changes that need sourced to a virtual assistant or blow the walls off of it, allow the to occur or are already occurring on receptionist service? lawyers to work where they are most a large-scale basis. Consumers are • Are your clients looking for productive, substitute on-site staff driving most of the change, and those timely, quality work regardless with virtual assistants and paralegals, lawyers who ignore what is hap- of where it is produced? replace in-house servers with cloud- pening risk alienation and/or irrel- • Are your clients looking for solu- based solutions and, voilà, you have evance. tions that do not break the bank? a virtual law firm. Lawyers must be able to provide • Are your clients willing to Really, we are talking about mobil- more services for less cost to clients, engage in innovative delivery ity – removing the proverbial chain- regardless of the type or size of the models that are more convenient to-desk. Having the choice of where client or practice area. In a global for them?

48 | January 2015 | NYSBA Journal Really looking at what clients care ing upon the size of the firm, internal or client referral sources. The bar about can be an agent of change. The support through an operations man- associations should be the natural answers to these questions can help ager may make sense. Otherwise, answers. the leadership in a virtual law firm alternative sourcing is a great option It is also incumbent on bar associa- be more creative. And, if you do not for virtual models. Virtual assistants tions to truly be focused on the future know the answers to these questions, and virtual receptionists provide ser- of the profession and providing the ask your clients. Honestly assessing vices to lawyers on a contract basis. tools needed for the profession to their answers can be enlightening and In this way, the cost of outsourcing evolve, including helping young and can be used to help guide the law firm ebbs and flows with the firm’s work- mature lawyers embrace technology about how it should operate. flow. and think about their practice man- On the technology front, the choice agement game. Core Considerations to of platforms is key to a cohesive vir- With the right support and resourc- Developing a Virtual Model tual practice. This is true for solos es, lawyers will be able to look for- To “pull off” a virtual law firm, the providing services online and multi- ward into the future and change the overall team is critical. Three primary lawyer firms operating in a distrib- way they operate. To this end, Prof. components make up this team: uted manner. Gone are the days when Richard Susskind often quotes Wayne • lawyers; major tech platform providers are Gretzky: “A good hockey player plays • administrative support; and simply considered vendors. These where the puck is. A great hockey • technology partners. providers should be considered part- player plays where the puck is going Let’s start with the lawyers. Just ners in your client service efforts (not to be.” ■ because a person is really smart and in the legal sense, of course). Working substantively proficient in a practice closely with these companies, lawyers area does not mean he or she is cut can learn new and innovative ways out for a virtual or nontraditional to deliver services, and the providers work environment. When working also can learn from how lawyers have MOVING? in a virtual or “distributed” manner, created innovative service models. each lawyer needs to possess an ele- let us know. ment of entrepreneurialism. This is How Do You Get There? true even for the lawyers who fall Analysis paralysis is often front and Notify OCA and NYSBA of any changes to under the category of employee and center when thinking of changing your address or other record information are not developing external busi- business models or creating some- ness. thing new. The Internet is a great as soon as possible! Building a team of lawyers remote- place to find direction in bite-sized, ly is a challenge and takes extra effort blog-post snippets. However, that OCA Attorney Registration because the members do not see each does not always help lawyers spring PO BOX 2806 other regularly. They cannot pop into into action. The natural relationship Church Street Station New York, New York 10008 each other’s offices on a whim. As that lawyers, especially young law- TEL 212.428.2800 such, it is essential that the individual yers, should turn to is the one they FAX 212.428.2804 lawyers work to build relationships have with their bar associations. Email [email protected] with each other and to establish trust Bar associations have long been in each others’ work and care of cli- the backbone of legal communities. ents. This also means that the firm Unfortunately, it is no mystery that New York State Bar Association leadership must create a culture of today’s younger lawyers are not as MIS Department collaboration through in-person or actively engaged as their “mature” One Elk Street Albany, NY 12207 video connections and other technol- counterparts. This is somewhat baf- ogy platforms. The ability to adapt fling because bar associations have TEL 518.463.3200 FAX 518.487.5579 to new technology is obviously an a lot to offer young lawyers, par- Email [email protected] important characteristic for any law- ticularly in an economy that lacks yer on this team. jobs. Our law schools are cranking Administratively, a virtual firm out more lawyers than there are needs support regardless of the size. traditional legal jobs, which makes Even solos should have adminis- it incumbent on new lawyers to trative support to whom they can integrate themselves into the profes- effectively delegate work so they sion and to meet and network with can focus on client service and the lawyers who can serve as mentors substantive work product. Depend- or who may be future employers

NYSBA Journal | January 2015 | 49 ATTORNEY PROFESSIONALISM FORUM

To the Forum: and the new guy on the block have you get the picture. And a general I am a mid-level partner in a firm adduced in support of X is their pro- counsel of a company may have to that is considered the leader in advis- prietary information, insofar as it rep- face this type of pressure much more ing a particular industry. Across the resents an ability to do something often than an outside advisor such relevant practice areas, the law as it lucrative that the rest of the market as you. applies to this industry is unsettled has missed. Client has prohibited us Your first question – whether you and developing, so our activity calls from disclosing that anyone believes may or must tell Client your personal for a lot of judgment. Clients often that X is permissible. opinion – turns in large part, in our rely on our advice almost as if our My boss has instructed me to tell view, on Client’s relationship with judgments were the law . . . which, Client that their other lawyer is mis- you and with your firm. of course, they are not, and that is the taken and has no feel for this very If Client clearly relies principally nub of my problem. specialized industry, and given our on your senior partner’s judgment In particular, based on our long- firm’s reputation that might well be or Client’s main relationship is with standing advice and the strength the end of the matter. But that will another lawyer at your firm, your of our firm’s reputation, no one in not be the end of the matter for me. best course of action would be to ask the industry engages in a particular I am not comfortable giving advice that lawyer to convey the firm’s posi- practice I will call “X.” Last week, that I honestly believe to be wrong tion to Client. You do not have a duty a new entrant to the industry (“Cli- or in participating in what appears to overrule the firm’s consensus if ent”) asked about “X,” and when I to me to be a cover-up. I have three you know that Client intends to rely gave the stock “no” answer, Client questions: on the firm’s viewpoint as opposed handed me a research paper written 1. May or must I tell Client my to your own, but you also do not by another lawyer who has never had opinion, regardless of the direc- have a duty to be a shill for anyone. contact with this particular industry. I tive from my senior partner? You cannot in good conscience be a read the paper with some skepticism 2. Is Client within its rights in pro- mouthpiece for falsity, but as long and discovered, to my surprise, that hibiting our firm from disclosing as it is clear to you that Client is not it utterly demolishes our long-held to others the fact that someone position and proves, conclusively in has concluded that X is permis- my judgment, that X is permissible. sible (regardless of what we The Attorney Professionalism Committee My boss (whose name is on our advise Client)? invites our readers to send in comments firm’s door) cannot find a hole in 3. If I leave my firm, may I dis- or alternate views to the responses the newcomer’s analysis but yet still close this sordid mess at least printed below, as well as additional insists that “we have our story and to justify why I am leaving or hypothetical fact patterns or scenarios to we are sticking to it.” I am not sure have changed my views, or am I be considered for future columns. Send whether he concedes that he has been bound to respect the firm’s con- your comments or questions to: NYSBA, wrong or refuses to consider that pos- fidences even if they constitute, One Elk Street, Albany, NY 12207, Attn: sibility, but his main concern is that in my judgment, intentional mal- Attorney Professionalism Forum, or by our firm and those whom we have practice? e-mail to [email protected]. advised have too much invested in Sincerely, This column is made possible through the status quo to consider a change. Painted into a Corner the efforts of the NYSBA’s Committee on He points out that all the leading Attorney Professionalism. Fact patterns, industry players have been able to Dear Painted: names, characters and locations presented operate successfully (though at some We sincerely sympathize with your in this column are fictitious, and any resem- additional cost) without doing X, so predicament. This is the sort of situ- blance to actual events or to actual persons, there is little to gain in our telling ation that has come increasingly to living or dead, is entirely coincidental. These everyone that we have been wrong characterize legal practice as it shifts columns are intended to stimulate thought all along. On the other hand, if we from a learned profession to a busi- and discussion on the subject of attorney say yes only to Client, it will gain an ness, albeit both a heavily regulated professionalism. The views expressed are unfair advantage over the others, and and self-regulated business, with those of the authors, and not those of the when word inevitably gets out we unique traditions that we still strive Attorney Professionalism Committee or will look silly (or worse) and may lose to uphold. Perhaps it was never really the NYSBA. They are not official opinions a lot of business. as quaint as we might prefer to think on ethical or professional matters, nor To complicate matters, Client – Abe Lincoln made a lot of money should they be cited as such. insists that the reasoning that they representing railroads – but we hope

50 | January 2015 | NYSBA Journal asking specifically for your personal New York Rules of Professional Con- bounds of ethics and professionalism judgment, you can, if you want, pass duct (RPC) prohibits disclosure of to give what you believe to be correct the buck. We caution you that this confidential client information with- advice. But be vigilant not to cross may not endear you to your part- out the client’s informed consent. the fuzzy line between answering a ners, who might see you as unwilling Specifically, Rule 1.6(a) of the RPC question when it is posed to you or to “take responsibility,” and, in any states that “[a] lawyer shall not know- is inherent in an analysis that you event, you will have no control over ingly reveal confidential information, have been asked to do, and, on the how the communication is presented as defined in this Rule, or use such other hand, volunteering information and whether Client infers or is told information to the disadvantage of or inducing people to ask you that that this is your conclusion. a client or for the advantage of the question. As a result, the approach set forth lawyer or a third person . . . ” (empha- Finally, the matter of confidenti- in the preceding paragraph may not sis added). As defined by the RPC, ality as to the legal conclusion and be the one you want to take. In that confidential information “consists of analysis, but still not as to details of case, and certainly if you believe that information gained during or relating your discussions with Client, will Client wants to rely on your judg- to the representation of a client, what- evaporate if and when there is gen- ment, you would be on solid ground ever its source, that is (a) protected by eral public awareness that someone to advise Client truthfully that the the attorney-client privilege, (b) likely says X is permissible. Our advice that firm’s view is “no” but your personal to be embarrassing or detrimental you and your firm still tread carefully view is “yes.” One way this finds to the client if disclosed, or (c) infor- continues: fair comment, yes; calling expression in complicated areas like mation that the client has requested out the attack dogs, no. taxation is a formulation like, “It may be kept confidential” but “does not Your third question concerns the be correct and reasonable advisors ordinarily include (i) a lawyer’s legal intersection of duty to clients and might so conclude, but as a firm we knowledge or legal research or (ii) duty to partners. The answer is not do not feel comfortable issuing that information that is generally known all that difficult, though you may opinion.” You should not give in to in the local community or in the trade, not be happy with it. Until the public the temptation to disclose why the field or profession to which the infor- becomes aware of the specifics, as firm’s view differs from yours or to mation relates.” See id. noted in the preceding paragraphs, denigrate your senior partner’s moti- Without even reaching the ques- you cannot disclose the details to vations, but you should feel free to tion of whether Client has a propri- promote yourself or even to explain tell Client that he can call your part- etary right in an item of intellectual your departure. Depending on what ners for further clarification. Obvi- property (the way Client might frame actually happens, you can say some- ously if you do this, you owe your this), your discussions with Client, thing along the lines of, “I found partners and your firm the courtesy, including his revelation to you of myself disagreeing with my part- if not the duty, of letting them know what the other lawyer had concluded, ners’ professional judgment or risk in advance what you intend to do so seem to be well within the scope of evaluation on one or more matters,” that they are not blindsided. what is deemed “confidential infor- or even “I was forced out because I No matter how this plays out, mation.” See id. refused to counsel a client in a way you should be prepared for a poten- Second, if your firm discloses and that was contrary to my best profes- tial showdown and for the possibil- criticizes the other lawyer’s conclu- sional judgment.” But beware that it ity that you may need to find other sion, observers may come to think of is a cold world out there, and in our employment rather soon. They may your firm as a bully and question its experience it is far from certain that teach about that aspect of profes- motives. No private actor, regardless people will not think of these as self- sional life in business school, but not of how influential, should wrap itself serving statements. There is really in law school. in the mantle of “the system” and not much else you can say without Turning to your second question – think that it has a duty to police what actually accusing your firm of mal- about who, in effect, owns the knowl- others do that overrides ethical and practice, and the life of a whistle- edge and the technology – we offer professional constraints. blower is lonely save for the excite- several observations. First, in view On the other hand, no one “owns ment of potentially having to defend of the novelty of the conclusion that the law.” If you happen to have had a defamation lawsuit. Client’s other lawyer has reached and occasion to think about the law, for Do you remember “The Game the important commercial implica- any reason, and another person asks of Life” in its original form, tions, we believe Client has a right you a question, you are free to answer before the advent of political to insist that you and your firm not it as you believe is correct. So, should correctness? There were spaces disclose this information. your partners reconsider or if you free marked “Revenge,” and with one As we have discussed many times yourself from the bonds that connect spin of the wheel you could instant- before in the Forum, Rule 1.6 of the you to them, you are well within the ly win the game as a “Millionaire

NYSBA Journal | January 2015 | 51 Tycoon” or go to the “Poor Farm.” If focuses on plaintiff’s side employ- been defendants to the lawsuit. Her you are prepared for long odds, con- ment litigation. Her firm filed a com- plan is to reach out to the client and sider how significant a breakthrough plaint in New York State Supreme assist the client in a potential mal- this is for Client. If you believe in Court on behalf of a client against practice case against the firm. After each other and Client is prepared to his former employer only. The initially contacting the client, Anna provide enough business to anchor claims asserted were for discrimina- threatened to destroy the evidence a practice, then hang out your own tion, retaliation and wage violations. of malpractice to get the client to shingle, run with the innovation and Anna told me she advised her boss acquiesce to the financial recovery in grow with Client. Others have done that they should be bringing claims the malpractice claim. She negotiated worse in situations like this. against the company’s principals, a 50% contingent fee as compensa- Sincerely, but, she said, he ignored her sugges- tion for her efforts and because her The Forum by tions even though the law was clear testimony would require her to leave Vincent J. Syracuse, Esq., that principals should have been the firm. And to make matters worse, ([email protected]), named in the suit. Anna and the client had apparently Matthew R. Maron, Esq., The defendant-employer moved engaged in a brief romantic affair ([email protected]) for summary judgment and the which began when his case came to Tannenbaum Helpern Syracuse & court dismissed the action. The stat- the firm and ended shortly after the Hirschtritt LLP and ute of limitations has apparently run case against his former employer was Robert I. Kantowitz, Esq. out on the claims which could have dismissed. ([email protected]) been asserted against the company’s The client is threatening to take principals. both Anna and her firm to the Disci- QUESTION FOR THE Anna told me that she was incensed plinary Committee. by the conduct of her boss and felt ter- What ramifications would Anna NEXT ATTORNEY rible for the client. She told me that face because of her conduct as PROFESSIONALISM FORUM she had evidence of her boss’s fail- described here? ure to acknowledge the well-settled Sincerely, A classmate of mine from law school law that supported her position that Not a Fan of Vengeance (Anna Associate) works at a firm that the individual principals should have

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Steingarten Issar Birger Andrew Kenton Kinard Erik Matti Tikkanen Christopher Lawrence Michael Joseph Turk Kathryn Dee Blackmer Andrew Kluger Amos En Min Toh Mooney Osato Osahon Ukponmwan Joshua David Bloom Remi Paul Korenblit Lauren Grace Tomaszczyk Shlomo Steven Moshen Natalie Elizabeth Zaremba Krista Elizabeth Bolles Alexandra Jocelyn Kushner Amanda M Toombs Mairead Noelle Murray Patrick Hubert Bour Lynda Lala Bouali Stefanos Ioannis Touzos Marissa Shaindel Neuman TENTH DISTRICT Laura Corinne Brockelman David Michael Lamb Luke Samuel Varley Matthew Vincent Hamilton Oren Agman Kerian Bunch Katherine Sophia Lamper- Jonathan Scott Wachlarz Noller Christopher John Ahern Katherine Melissa Burke radetsky Jasmine Nicole Wade Dustin Thomas Pangonis Ololade Teresa Ajifowobaje Gabriel Allan Burnham Sophie Louise Lange Samantha Rebecca Wadell Shirley Paul Rhoda Yohai Andors Romina P. Canessa Matthew Kenneth Larssen Catrina W Wang Eric Gregory Pekar Tara M. Arzberger Susrut A. Carpenter Beeta Bianca Lashkari Doreen K. Weisfuse Genevieve Elizabeth Perez Garabet Vartan Badrajan Serafina Frances Chaelen I-ling Elaine Lee Miles Wiley Rishi Raithatha Tommas F Balducci Wen-ying Angela Chang John Mark Leonard Charles Robert Williams Kendall Renee Randolph Liliana Birziche Raymond Chau Li Li Andrew James Witt Phillip Andrew Raymond Jennifer Beth Cahn Carrie Suk Kwan Chen Xunming Lim Andrew Woodman Chelsea Boehme Rice Eric Jason Canals Clayton Thomas Cheney Anna Kathryn Lindeman Rui Xu Gabriella Maria Ripoll Carol Megan Celestine Alice Woon Cheng Judd Abram Lindenfeld Akiko Yamada Carmelle Robillard Kevin John Corrigan Sarah J. Choi Jiaping Liu Brian Keun-il Yoo Evan Rosin Michael Patrick Coughlin William Chung Kolby Keaton Loft Daniel Richard Secatore Nicholas William Defraia Jascha Kennedy Clark Amanda Kelsey Loh SECOND DISTRICT Patrick Michael Sellers Alfred Ernest Delgreco Dina Marie Colandro Matthew Nicholas Loporto Nadia Naz Ali Inna Shlapko Brian J. Descovich Aude Coquatrix Rachel L. Lorig Shaharyar Ali Berel Shurin Michael William DeTrano Alana Vera Dagher Erin Kathleen Lovall Deepak Dutt Attri Alexandra Houston Smith Alexander Ian Diamond Reece Campbell Dameron Hayley Elizabeth Lowe Jason Douglas Barnes Mary Catherine Spooner Russell Jordan Edwards Lilliana Dealbert Ava E Lubell Michelle Ben-david Ethan Adam Stavsky Marc Jordan Eisenberg Aneesha S Deshpande Barbara Karen Luse Renee Aisha Brutus Claire Hansen Suni Robert A. Ferrara Conor Joseph Devine Andrew James Macklin Yan Cao David Grafton Switzer Evan Scott Fidelman Christine Marie Didomenico Angelo John Marino Breanne Pauline Chappell Peter F. Tringali Orlee Fishkin Tyler Doh Charles Curtis Mathes Jane-Adrienne Karla Charles- Michael Wegh Thomas John Foy Suzanne M. Dooley Natsayi Mawere Voltaire Jennifer Kathryn Williams- Jesse Michael Freeman Kaitlin Scarlet Doran Christopher Michael McBrady Diana Gabriela Chavez alvarez Stephen Ghee Erich Andreas Drotleff James M. McGuire Dana Yeuk Yi Cheng Seo Yun Yang Frank A. Gramarossa Megan Elizabeth Dubatowka Matthew Graham Lewis Helena Claraso Collbatalle Brian Henry Guy Karen L. Duncan McLeod Sarah Rose Cohen THIRD DISTRICT Tiffany Antoinette Harris Harland Samuel Dye Mark McMillan Trevor Antwoine Cooper Kendre Henderson Keys Meaghan Elyse Howard Guillermo Ernesto Edelman Kevin Kent McNish Margaret Mary Cremin Robert T. Imrie Nicholas David Emguschowa Aditya Sajjanraj Mehta Xavier Aloysius Cunningham SIXTH DISTRICT Catherine Nicole Jones- Elyssa R. Emsellem Matthew Charles Frances Denning Dales Julia Berliner Bressman hankins Manuel P English Micklavzina Melissa Marlene Daniels John Patrick Ciccarelli Herbert Steven Kellner Kelly Ann Eno Robert Miller Jakob William Deitch John J. Okray Katelyn G. Kelly Leilah Nicole Escalera Edward A. Mishan Benjamin Daniel Fidler Brianna Kay Serrano Phillip Khezri Timothy August Fallon Madelyn Morris Elizabeth Filatova Xueqing Wan Tomas Andrius Klimas- Jeremy Charles Feist Conor Michael Mulroe Miles Aubrey Finn mikalauskas Timothy Mark Fetherston Reva Ragini Narula Aryeh E. Fried SEVENTH DISTRICT Magdalena Alexandra Lynch Claire Marie Fong Victoria Phi-khanh Nguyen Thomas Henry Fuell Bradley Edward Lewis Paul Nicholas Macerino Ayirini Monica Fonseca- Caroline Anais Olsen Patrick Gibson Gregory Alan Marcus sabune Chul Hong Park Andoni Goicoechea EIGHTH DISTRICT Nataliy S. McKinney Joshua Paul Frank Brett Harris Pavony Jennifer L. Goltche Paul Elyash Robert J. Mitchell Evelyn Neel Fruchter Jose Nicolas Perez-sierra Marina Gonik Michael Moskowitz Omer Gamlieli Kurt B. Plankl Laura Antonia Gretz NINTH DISTRICT Erin Murtha Andrei Girenkov Genevieve B. Quinn Stephanie Julia Grimaldi Jennifer George Arthungal Michael Thomas Nolan Ali Nora Glaser Maurice Arthur Reichman Philip Gurevich Selina Ann Billington Jamal Akeem Perry Mark Goldsack Lauren Ruth Reznick Philipp Gurevich Sylvie Bourassa Joseph W. Prokop Joshua A. Goldstein Mitchell James Riley Charles Jordan Hamilton Jordan Courtney Conger Steven Craig Richman Luis Felipe Gomez Alfaro Vanessa S. Rutman Nakia Denise Hansen Nadia Ann-marie Daley- Rob Jon Rodgers Matthew Aidan Grogan Gareth S. Ryan Michael William Harkness blake Carolina Rodriguez Samuel Allen Guiberson Renata Rzepka Moshe M. Herzberg Anne D. Davenport David Z. Rotman Monika Hargitai Jesse Scott Santamaria Brian Scott Hewitt Rowena Dungca David Zachary Rotman Hilary Letitia Harris Scott Alan Schreiber La-asia S. Hundley Monica Elbakry Dennis James Ryan Peter Hoffman Hart Bryan G. Seeley Samuel Joseph Jackson Katharine Carson Fendler Ariana Nushin Sanai Candice B. Hebden Maryam Khadija Brian N. James Brian J. Freer Ashley Diana Sauerhof Jane Elizabeth Hogan Seghrouchni Dahsong Kim Christopher C. Garitee Madeline Shapiro Lindsey M. Housman Matthew Cassey Sferrazza Jennifer M. Kirby Alyssa Chantel Gillespie Johnny Shin Jonathan David Huang Shailee Diwanji Sharma Nathaniel James Kuo Alexis M. Gregory Raja Singh

NYSBA Journal | January 2015 | 53 NEW MEMBERS WELCOMED

Glenn J. Sobel OUT OF STATE Ashwin Kaja Megan McLeod Edward Milo Schwab Nadia Tariq Tolulope Opeyemi Akinsanya Tomoyuki Kanda Cristina Mejia Allison Sebag John Benjamin Telesca David Benjamin Amerikaner Seo Gu Kang Marcella Berenice Mesquita Konstantin Shakko Keri Jean Wasson Lauren Jeanene Anderson Kahori Kawata De Mendonca Gurgel Hengda Shen Jaclyn Ann Weber-cantrell Maryam Arif Nandini Khaitan Adrian Piotr Michalak Cesareo Antonio Serrano Joshua M. Weiss Mariana Sofia Avendano Jung Hun Kim Sarah Margaret Mielke Singzon Max Aaron Wolfson Bolivar Mok Hong Kim Charles Andrew Miller Kwangik Son Yasuhide Ayabe Paul Jaewon Kim Kunio Miyaoka Julie Song ELEVENTH DISTRICT Aliye Inci Aydogdu Janna E. King Lisa Marie Morel Joseph Stefanelli Melanie Abrams Sahar Sandra Azima Jennifer Kirby Yoshihiro Morisato Elena Sudneko Gillian Anne Barkins Alexandra Mari Bachan Jordan Danielle Kohl Alexandra E. Mormando Ga-yoon Victor Suh Anna Berezovski Yvette Badu-nimako Adam Hubbell Kol Emmaleen Simmone Christine Sun Terence Bokosha Dae Hyun Baek Dorthy A. Koncur Muldoon Reid Weldon Swanson Thomas D. Bradshaw Diego Barrera Pieck Birgit Kuba Clara Gabriela Munoz Steven James Talevi Raluca Diana Bulai Norman Bellil Rishab Vijaykumar Kumar Fernandez Tao Tao Samuel Joseph Capasso Ronny Samy Beshay Kenneth Kei Lum Kwan Stefanie Talena Murphy- Kevin Lee Terry William Chung Hartman Evans Blanchard Karen Laik boykins Chloe Thomson Alex Abner Cohen Richard Stephen Bloomfield Florent Pierre Alexandre Fra Yoji Nakamaru Roxane Tonnelier Ian Stuart Cole Michael Bradfield Lallemant Michael Daniel Neff Christopher Frederick Treiber Diane Courtney Hilary Nayo Briscoe Diane Stephanie Larmon- Esther Eguono Oisamoje Renato Raymundo Treves Noelle Diaz Wen Bu dixon Demar Gascon Osbourne Yuki Tsuda Nhi Thao Dinh Robert Anthony Bucci Emma Rose Larson Daniel Jerry Pacilio Tino Van Den Heuvel Xiu Mei Dong Jared Serge Buszin Anna Lasseri Yingfan Pan Julie Vandeloo Leily Faridzadeh Valerie Catherine Byrne Mary Kathleen Leahy Zhenhua Pan Marc Joseph Veilleux Konstantinos Gaisidis Michael G. Cassidy Vanessa Scott Lee Stephen J. Panico Giannina M. Villa Tracy Ann Golden Patricia Chang Daniel Harrison Leff Ye Lim Park Ashley M. Viruet Robert Allen Greer Sj Chapman Clinton J Leite Joseph Carmen Patituce Jonathan Edward Vosper Edwin Miguel Hernandez Yan Chen Wiebke Lemmer Joshua Seth Perlman Katie Y. Wang Garcia Xiaoxi Cheng Christopher G. Leo Tilman Lorenz Petersen Menghan Wang Benjamin Robert Humphreys Ladan Danielle Cherenegar Yitzchak Hillel Lieberman Claudia Pharaon Yicen Wang Sergey Kalantarov Solomon Jason Chouicha Chiayi Lin Ailsa Hamilton Pierrepont Hung Chieh Wei Komal Kumari Keluskar Kienan Duane Christianson Jing-yi Liou Nicholas Alexander Pilgrim Rachel Beth Weinberger Marin Stacie King Siena Byass Blake Colegrave Hang Liu Meghna Shailesh Alexandra Williams Winter Sara Anne Kirby Michael Anthony Collyard Wei-li Liu Rajadhyaksha Jason Daniel Wright Brandon Michael Kopcienski James Henry Cook Salvador M. Llach Aslam Abdul Moiz Rawoof Scott Chi-kang Wu Michelle Lai-fong Lau Cesar Leonidas Coronel Eric Andrew Lowe Vasileios Regkakos Yeyun Yang Jessica Yessenia Lazo Ortega Jingbo Ma Wenxia Ren Keping Yin Malayika Augustin Lemoine Kevin Coughlin Yong Quan Ma Rania K. Riad Wentao Yuan Shaan Sarwar Lodi Brooke Jennifer Daniels Lisa Marie Madalone Cassandra Barbara Roth Petros Zerveas Matthew Alexander London Jane Mackenzie Duane Angelika Izabela Marek Katlyn Quinn Ryan Chi Zhang Gabrielle Marie Martinez Trevor Richards Dubois Erinn Denise Martin Eiji Sakai Shen Zhao Alicia Ann Matusheski Patrick El Hayek Richard Manuel Martinez Anna Rita Sakr Yingqian Zhao Emmanuel Mevs Sapir Elazar James William McCarthy Mark H. Schepps Yuting Zhu Sarah Millings Niklas Teodor Elofsson Caroline McKenna Britta Gunilla Schiebel Grant Daniel Munyon Meghan Kelly Everlanka Sarowar Mustafa Morenike Fajana Yu Nie Deborah Farber-kaiser Wilson Y. Pok Jessica L. Finz Miriam Pollack Diana Cristina Gambone In Memoriam Ronald Wesley Popo Ruth Yuanyuan Gao Yi Ri Michael Gebauer Samuel Adelson Dave Capucilli Jiro Murase James William Russell Elizabeth Geevarughese New City, NY Baldwinsville, NY New York, NY Joseph Michael Spadola Stefana Laurentia Ghita Jason Andrew Speights Sharon Robles Glazier Casper Mark Ahasic Dennis Henry Cleary William E. Murnighan Jason Anthony Swinburne Mark Aaron Goldfeder Kirkwood, MO Oceanside, CA Toronto, ON Adam Mark Tavares Rafael Gomes Gobbi Scarlett Taylor Jeffrey Samuel Greenberg Andrew Zachary Arnett Richard F. Coyne John Ben Pessala Christopher Alan Tellet Dimitri Gremont Dayton, OH Shaker Heights, OH Westbury, NY Erik P. Vaklinov Srishti Gupta Susan Varghese John Niel Guzman Anthony J. Bellitto Donald Sheldon Day Richard S. Ringwood Philip J. Velez Tianji Han Bronx, NY Buffalo, NY Endwell, NY Danny Hakim Josef Vogel Elizabeth Davis Happel Larisa Albertovna Voronina Nickolaus Martin Hastings Susan Bender Capanelli Jay M. Friedman Howard A. Ruditzky Anita Wu Patrick Joseph Healey Farmingdale, NY Pittsford, NY Brooklyn, NY George Backus Hefferan James W.B. Benkard Charles A. Judelson John F. Scheich TWELFTH DISTRICT David Scott Heier Cindy Nicola Brown Christopher Michael Helsel New York, NY Goshen, NY Richmond Hill, NY Eileen Burrowes Arielle Heo Alan Blum Rebecca Sue Levine Shmuel Semel Jordan Richard Gerow Adam T. Hoffman Princeton Junction, NJ New York, NY Caesarea, Israel Illianov Alberto Lopez Wenyue Hou Larancuent Yu Wen Huang Daniel Boone Henry P. Lucas Walter Winfield Weber Yuxi Huang Savannah, GA Brooklyn, NY Catskill, NY THIRTEENTH DISTRICT Yerin Hur Andres Casas Mahdi Maher Ibrahim Francis C. Brown Neil McDonell Lester P. Zander Gregory Santo Lombardi Jasmine Denise Lashae New York, NY New York, NY Scarsdale, NY Michael Emeka Nwuba Johnson Joe Rubin Richard M. Juang

54 | January 2015 | NYSBA Journal THE PRESIDENT’S MESSAGE Watson joined the Association as its How do we recognize and value what CONTINUED FROM PAGE 6 new Executive Director, after serving as they bring to our profession? And how the executive director of the Cleveland do we convey to them the many sig- Trade Law (UNCITRAL). UNCITRAL Metropolitan Bar Association, and at nificant benefits that participation in has approached the Association to work two other law-related associations and our Association can provide over the with it in identifying future projects, as a practicing attorney. In October, the course of one’s legal career? and I have received a letter from the Sec- Association appointed Elizabeth Der- At our Annual Meeting, I have cho- retary of UNCITRAL confirming this. rico to a new position as associate sen to examine this issue as part of Also in October, on behalf of the executive director of strategic member my Presidential Summit. The first part Association, I attended the Brazilian engagement. She brings to this position of the Summit will feature a panel Lawyers National Conference in Rio her 19 years of experience as associate discussion on the timely and impor- de Janeiro. Held every three years, director for the Division of Bar Services tant issue of Wrongful Convictions. it was attended by more than 16,000 at the American Bar Association. David Next will follow a discussion titled attorneys. At the opening ceremony of Schraver, the immediate past president “Bridging Generational Fault Lines for the convention, I signed a memoran- of the Association, led the successful the Future of the Legal Profession.” A dum of understanding, approved by efforts to bring these two very highly panel of leaders in the profession will the Association’s Executive Commit- qualified people to lead the Associa- discuss how today’s generational mix tee, with the Ordem dos Advogados tion staff, and the Association owes of practicing attorneys can best work do Brazil (Brazilian Bar Association), him our gratitude. The Association also together in our profession’s new nor- which represents the more than 800,000 hired a new marketing director, Grazia mal of rapidly changing technology, attorneys in Brazil. I then participated, Yaeger, and a new director of the State increased client demands, global com- alongside the attorney general of Bra- Bar’s award-winning Law, Youth and petition and changing business models. zil, in a panel on international arbitra- Citizenship program, Martha Noordsy. They will examine the different atti- tion. We are looking forward to future We now have the leadership to help tudes these generations have in their exchanges on this and other topics. As our excellent staff to evolve and to career approaches and expectations, part of my visit, I presented the Brazil- keep up with the changing demands and what this means for employers; ian Bar president with a copy of our on our Association. It is the role of the the differences in their communica- Association’s newly published book, volunteer leadership to support the tion strategies, use of technology and New York Contract Law: A Guide for staff in its efforts to continue to provide expectations of privacy; whether and Non-New York Attorneys. Next year’s outstanding service to our members how ethics might evolve and fit into International Section seasonal meeting and to attract new members. a new and changing culture; and their will be held in Sao Paulo, Brazil, which interest in professional development should help cultivate the interaction Which Brings Us to a Most and mentoring. between our two bars. Important Question How does our bar association These opportunities to meet with During my term, the most important remain relevant? This is a critical ques- UNCITRAL and the Brazilian Bar question I have been discussing with tion for all bar associations, and we Association are further evidence of the Section members and leadership is, should work together to arrive at some trend toward globalization occurring How does our bar association remain answers to it. in the legal and business world. There relevant to the younger generations I look forward to continuing to is strong recognition of the importance of attorneys? In particular, how do serve you in 2015. ■ of New York law as the law of choice we communicate with these attorneys? in international transactions, and it is clear that New York attorneys and this Association will be called upon to play an increasingly important role in the international legal sphere, and we must work to shape this role.

The Association Staff At the Association’s headquarters on Elk Street in Albany, the State Bar has appointed several key top staff members during my term. These appoint- ments reflect the Association’s deep commitment to delivering excellent service to our members. In July, Dave

NYSBA Journal | January 2015 | 55 THE LEGAL WRITER CONTINUED FROM PAGE 64 Many of the same principles for if the “plaintiff properly effected vacating a default judgment, dis- service of process in some manner Exception: If a defendant appears cussed below, apply to a plaintiff’s (other than by personal delivery).”32 and opposes a plaintiff’s application vacating a judgment of dismissal. If the plaintiff served a corporate for a default judgment, the defendant A plaintiff may seek to vacate its defendant by delivering the sum- may appeal the entry of a default default by showing a reasonable mons on the Secretary of State, that judgment or order.19 excuse for its default and a meritori- “does[n’t] constitute personal deliv- Exception: If a court enters a ous cause of action. ery on defendant’s agent for pur- default judgment against a party on Public policy favors that a court, poses of CPLR 317.”33 the basis of a disclosure sanction, a absent prejudice, dispose of a case If the plaintiff didn’t serve you party that appeared and opposed the on the merits.26 Courts have a liberal properly, move to vacate a default disclosure sanction may appeal the policy to vacate default judgments judgment under CPLR 5015(a)(4) and entry of the default judgment.20 A to further justice and to give the par- to dismiss the action under CPLR party that doesn’t oppose a motion ties their day in court to litigate their 3211(a). The Legal Writer will dis- for disclosure sanctions may move cases.27 cuss 5015(a)(4) — moving to vacate to vacate its default under CPLR a judgment on the basis of lack of 5015(a).21 Motions to Vacate a Default jurisdiction — in the next issue. Exception: One scholar suggests Judgment A court has the discretion, regard- that if a party doesn’t oppose a The relevant statutory provisions for less of the method of service, to summary-judgment motion and the moving to vacate a default judgment vacate a judgment under 5015(a)(1) court enters a default judgment, the are CPLR 317 and 5015(a). for excusable default, that is, if the defaulting party should appeal or You may move to vacate a defaulting party offers an excuse for move to reargue or renew.22 The judgment under CPLR 317 or its default. If a defendant was per- defaulting party may not rely on 5015(a)(1).28 At the same time, you sonally served, the defendant may CPLR 5015(a) to move to vacate.23 may also move to vacate under CPLR move under CPLR 5015(a) to vacate But most practitioners move to 5015(a)(2)–(5).29 a default judgment.34 The Legal Writer vacate a default before appealing CPLR 317 doesn’t apply in divorce, discusses the CPLR 5015(a)(1) ground or moving to reargue or renew. A annulments, or partition actions. — excusable default — below.

Non-parties to an action may move to vacate a judgment if they demonstrate a legitimate interest in moving to vacate.

court might be persuaded to vacate CPLR 5015(a) motions are avail- If you’ve moved incorrectly under your default even if you didn’t able in all types of cases, including CPLR 5015, a court may treat your oppose your adversary’s summary- matrimonial cases.30 motion as a CPLR 317 motion.35 judgment motion. In deciding which A plaintiff may move under CPLR One Year to Move to Vacate. You option is best for you and your cli- 5015(a) to vacate a judgment or order have one year to move under CPLR ent, consider the time, money, and of dismissal.31 317 or 5015(a)(1) to vacate a default effort you’ll need to expend. Overlap of CPLR 317 and CPLR judgment. In exercising discretion, a court 5015(a)(1). CPLR 317 and 5015(a) pro- If you’re moving under CPLR may vacate a default judgment on vide the method by which defendants 5015(a)(2)–(5), you’re not bound by “payment of costs, disbursements, and may move to vacate a judgment. the one-year period.36 But the court expenses,” including attorney fees.24 CPLR 317 applies when service may determine that laches applies.37 A court won’t vacate a default is “by a method other than person- Under CPLR 317, the one-year unless you demonstrate in your al delivery to the defendant under period is calculated from the time moving papers a reasonable excuse CPLR 308(1) or to the defendant’s the defendant “know[s] of entry for the default and a meritorious Rule 318 agent under CPLR 308(3).” of the judgment.” The defendant’s cause of action or defense.25 CPLR 317 is thus applicable only source of knowledge is irrelevant.38

56 | January 2015 | NYSBA Journal If you’re moving under CPLR 317 The Court That Rendered Interested Person. Any interested more than a year after entry of judg- Judgment. Bring your motion to person may move to vacate a judgment, in your moving papers state vacate a judgment “to the court that ment.54 “facts showing how and when [you] rendered” the judgment.47 No court, A losing party is the one that usu- learned of the judgment’s entry.”39 other than the court that rendered its ally moves to vacate a judgment. But Under CPLR 5015(a)(1), one year judgment or an appellate court, may a party that obtained a judgment in is calculated from the time a defen- vacate the judgment.48 For example, its favor — a winning party — may dant “is formally served with ‘writ- the New York State Supreme Court also move to vacate a judgment.55 A ten notice’ of the entry of the judg- may not vacate a New York City winning party may move to vacate a ment, apparently without regard to Civil Court judgment. Likewise, the court’s judgment if, for example, it whether [the defendant] knew about New York City Civil Court may not seeks to add a claim on the basis of it before then or not.”40 If you were vacate a New York State Supreme newly discovered evidence.56 never formally served with written Court judgment. A court in one Non-parties to an action may notice, under CPLR 5015(a)(1), “the county may not vacate a judgment move to vacate a judgment if they one year never starts [to run].”41 of the same court from a differ- demonstrate a legitimate interest in The one-year period “is[n’t] a stat- ent county: Civil Court, New York moving to vacate.57 ute of limitations and is therefore not County, may not vacate a judgment Corporate Defendants. A com- rigid.”42 Even if the one-year period from Civil Court, Bronx County, and mon reason that corporate defen- expires, a court still has the discre- Civil Court, Bronx County, may not dants move to vacate defaults is that tion to vacate a judgment.43 vacate a judgment from Civil Court, they don’t receive notice of a sum- Cut-Off Period. Under CPLR New York County. mons served on the Secretary of State. 317, you may move to vacate a Notice. CPLR 5015(a) provides Even if a corporate defendant failed judgment “in no event more than that a motion to vacate a judgment to keep its address current with the five years after such entry.” Your must be made on “notice as the Secretary of State, some courts for- motion to vacate a judgment will court may direct upon.” Scholars give the omission and grant a vaca- “not lie if more than five years have have noted that this means you must tur.58 If the address is correct and the elapsed since the entry of judg- move by order to show cause if defendant “merely den[ies] receipt ment.”44 you’re seeking to vacate a default of the summons and complaint . . . No time limitation exists under under CPLR 5015(a).49 Moving by [that’s] not sufficient to warrant CPLR 5015(a)(1). order to show cause allows a court to vacatur under CPLR 317.”59 If a cor- CPLR 5015(a). CPLR 5015(a) set the method and manner in which porate defendant doesn’t claim mail allows you to move to vacate a service must be completed.50 If your from the post office, a court might judgment or court order. CPLR adversary has obtained new counsel, not vacate a default judgment under 5015(a) provides that “[t]he court a court may direct you to serve your either CPLR 317 or 5015.60 which rendered a judgment or adversary’s new counsel.51 Moving What You Must Demonstrate. order may relieve a party from it by order to show cause allows a Under 5015(a)(1), you’ll need to upon such terms as may be just, court to recognize “the applicable demonstrate in your moving papers on motion of any interested per- facts, including lapse of time, and a meritorious defense and a reason- son with such notice as the court direct accordingly about whom and able excuse for the default. may direct upon . . . [five possible] how to serve” the order to show Under CPLR 317, you’ll need to ground[s].” The five grounds on cause.52 Practitioners move by order demonstrate in your moving papers which you may move to vacate a to show cause because it’s an expedi- a meritorious defense and proof of default are the following: (1) excus- ent way to have the court hear their your basis for relief, such as no able default; (2) newly discovered motions to vacate judgments. personal service. Although scholars evidence; (3) fraud, misrepresenta- If you move by notice of motion, a disagree about whether you need tion, or other misconduct; (4) lack court might deny your motion on the to show a reasonable excuse for the of jurisdiction; and (5) reversal, procedural ground that you didn’t default, caselaw suggests that you modification, or vacatur of a prior move by order to show cause. But a needn’t show a reasonable excuse. judgment or order. Even though court might exercise its discretion. It The Legal Writer discusses this ques- the grounds listed in CPLR 5015(a) might consider your notice of motion tion below. might seem “thorough . . . [they are] and discuss the merits of the motion To vacate a default judgment, a not exhaustive.”45 A court has the if denying the motion on procedural defendant need not as a matter of “inherent discretionary power to grounds will prejudice your adver- law establish its defense.61 Likewise, vacate its judgments and orders for sary and if considering the merits in vacating a dismissal, a plaintiff good cause shown, not limited by of the motion won’t prejudice your need not establish as a matter of law the CPLR 5015(a) list.”46 adversary.53 that it has a cause of action.

NYSBA Journal | January 2015 | 57 The “quantum of proof . . . [on] ous defense when moving to vacate a repeatedly failed to turn over disclo- a motion to vacate a default is not default under CPLR 317 or 5015(a)(1). sure to your adversary and the court as great as that which is required to You show a meritorious defense enters a default judgment against oppose a motion for summary judg- by providing an affidavit from you, one scholar suggests that doing ment.”62 someone with personal knowledge so “does not support a motion to Stipulation. Under CPLR 5015(b), of the defense. Some practitioners vacate the ‘default’” under CPLR if your adversary agrees to vacate a refer to it as an “affidavit of mer- 5015(a)(1).79 default judgment you may submit its.”70 A defendant may provide an CPLR 5015(a)(1) contemplates a stipulation to the court that the affidavit of merits.71 Someone other not only a defendant’s but also a default judgment is vacated.63 The than the defendant may provide an plaintiff’s motion to vacate a default judgment.80 Upon showing good cause, plaintiffs may move to vacate a default judgment entered in their Under CPLR 5015(a)(1), you’ll own favor.81 Because courts want to resolve need to demonstrate a disputes on the merits, they’ll accept a broad range of excuses meritorious defense and a to vacate a default.82 A court has “wide discretion to determine what reasonable excuse for the default. constitutes an excusable default.”83 The moving party must offer “some excuse for the default — even if the parties, or their counsel, may sign affidavit of merits if the affiant has excuse is[n’t] a compelling one.”84 the stipulation.64 personal knowledge of the facts.72 A court will consider the length But no stipulation will undo a A court will likely find that an affi- of the delay in moving to vacate, marshal’s or “sheriff’s execution sale davit that lacks personal knowledge whether a party will be prejudiced, already conducted in enforc[ing] . . . of the facts has no probative effect; whether the default was willful, [a] default judgment.”65 if so, the court will likely deny a and the strong public policy favor- motion to vacate a default judgment ing decisions on the merits.85 Grounds to Vacate a Default on the basis that the moving papers The court has the discretion to Judgment Under CPLR 5015(a) are deficient.73 Likewise, an attor- consider law office failure in vacat- Excusable Default, CPLR 5015(a)(1). ney’s affirmation is deficient if the ing a default.86 The first ground under CPLR attorney lacks personal knowledge In the next issue of the Journal, the 5015(a) for which you may move of the merits of the case. Legal Writer will continue with mov- to vacate a default is excusable If you’ve defaulted in a medical- ing to vacate a default judgment. ■ default. The excusable-default malpractice action and you’re mov- ground under CPLR 5015(a) over- ing to vacate the default, provide an 1. 1 Michael Barr, Myriam J. Altman, Burton N. Lipshie & Sharon S. Gerstman, New York laps with CPLR 317. affidavit of merits from a medical Civil Practice Before Trial § 39:01, at 39-11 (2006; Given the court’s broad discretion expert who has experience in the Dec. 2009 Supp.). in vacating defaults, New York courts particular field.74 2. Id. § 39:02, at 39-11. are liberal about vacating defaults.66 A court may vacate a default “in 3. Id. One scholar has pointed out that whole or in part.”75 The court, for 4. Id. § 39:91, at 39-17. providing a reasonable excuse for a example, may vacate a default only 5. Id. default is required under both CPLR to the extent of permitting a trial on 6. Id. § 39:100, at 39-18. 317 and CPLR 5015(a)(1).67 Another damages but not on liability if the 7. Id. § 39:101, at 39-18. Replies to counter- claims are mandatory except in the New York scholar suggests that you needn’t court determines that the movant City Civil Court. In the New York City Civil provide a reasonable excuse under “inadequately contested” liability in Court, replying to a counterclaim is optional. CPLR 317.68 Caselaw suggests that if its moving papers.76 N.Y. City Civ. Ct. Act § 907(a). Section 901 of a defendant that moves under CPLR You needn’t wait until a judgment that Act doesn’t mandate a reply. If the plaintiff doesn’t reply, the court will deem the coun- 317 need not show a reasonable or order has been entered before terclaim denied. Perlson v. Titone, 167 Misc. 2d excuse, the defendant need show moving to vacate.77 593, 596, 638 N.Y.S.2d 1000, 1001 (Civ. Ct. N.Y. only that it didn’t receive notice in If you’ve had an opportunity County 1995). time to defend against the action.69 in court to address the issue that’s 8. Barr et al., supra note 1, § 39:103, at 39-18. Just to be sure, practitioners may the basis for the default, appeal the 9. Id. § 39:102, at 39-18. want to demonstrate a reasonable judgment; don’t move to vacate the 10. Id. 11. Id. § 39:110, at 39-19; CPLR 3215(i). excuse for the default and a meritori- judgment.78 For example, if you’ve

58 | January 2015 | NYSBA Journal 12. Barr et al., supra note 1, § 39:113, at 39-19. brought ‘with such notice as the court may N.Y.S.2d 74, 75, 456 N.E.2d 1197, 1198 (1983))). 13. Id. § 39:120, at 39-19. direct.’ Thus, the motion should have been 70. Id. § 108, at 203 (citing Benadon v. Antonio, 10 brought on by order to show cause. Plaintiff’s 14. Id. § 39:121, at 39-20. A.D.2d 40, 42, 197 N.Y.S.2d 1, 4 (1960)). motion was not brought on pursuant to notice 71. Id. 15. Id. § 39:122, at 39-20. directed by the court and thus jurisdiction over 16. Id. § 39:320, at 39-34; 1 Byer’s Civil Motions defendant was not obtained. We conclude that 72. Id. § 23:01 at 253 (Howard G. Leventhal 2d rev. ed. the court properly granted defendant’s motion 73. Id. § 108, at 203–04. 2006; 2013 Supp.). to vacate both the 1999 judgment and the 74. Byer’s Civil Motions, supra note 16, § 23:03, 17. Barr et al., supra note 1, § 39:320, at 39-34. amended judgment pursuant to CPLR 5015(a) at 256. (1). The court did not abuse its discretion in 18. Id. 75. Siegel, supra note 34, § 427, at 752. determining that defendant demonstrated a 76. Id. 19. Id. § 39:321, at 39-34 (noting that if a defen- reasonable excuse for the default by establish- dant doesn’t oppose the entry of a default judg- ing that the court had not obtained jurisdiction 77. Id. ment but appears at an inquest to contest dam- over him . . . the court properly determined that 78. Id. ages, it may appeal the judgment on the issue of defendant established a meritorious defense.”). damages). 79. Id. (citing Achampong v. Weigelt, 240 A.D.2d 50. Siegel, supra note 34, § 426, at 751. 247, 248, 658 N.Y.S.2d 606, 607–08 (1st Dep’t 20. Id. § 39:322, at 39-34. 51. Id. 1997); Pinapati v. Pagadala, 244 A.D.2d 676, 678, 21. Id. 664 N.Y.S.2d 161, 163 (3d Dep’t 1997)). 52. Id. 22. Id. § 39:323, at 39-34. 80. Id. 53. Rudgayzer & Gratt v. LRS Commuc’n, Inc., 23. Id. 3 Misc. 3d 159, 163, 776 N.Y.S.2d 158, 161 (Civ. 81. Id. 24. Byer’s Civil Motions, supra note 16, § 23:02, Ct. Kings County 2003) (“The Court notes that 82. Id. at 254. plaintiff moved in the instant case by a motion, 83. Barr et al., supra note 1, § 39:380, at 39-39. 25. Id. § 23:03, at 255. not by an order to show cause. CPLR Rule 5015 84. Id. 26. Id. § 23:01 at 252. is clear that the instant motion should have been commenced by an order to show cause because 85. Byer’s Civil Motions, supra note 16, § 23:06, 27. Id. the notice of motion should have been given ‘as at 260. 28. Barr et al., supra note 1, § 39:331, at 39-34. the court may direct.’ However, as denial of the 86. Siegel, supra note 34, § 108, at 205. 29. Id. § 39:330, at 39-34. instant motion on procedural grounds would 30. Id. § 39:361, at 39-37. prejudice defendant, and proceeding on the merits of the instant motion will not prejudice 31. Id. § 39:333, at 39-35. defendant, the Court will proceed to the merits 32. Id. § 39:341, at 39-35; § 39:343, at 39-36 of the instant motion.”). (noting that personal delivery under CPLR 317 54. Byer’s Civil Motions, supra note 16, § 23:01, means “in-hand” delivery) (citing Nat’l Bank of at 253. Northern New York v. Grasso, 79 A.D.2d 871, 871, 434 N.Y.S.2d 553, 554 (4th Dep’t 1980)). 55. Siegel, supra note 34, § 426, at 751. 33. Id. § 39:343, at 39-36 (citing Pabone v. Jon-Bar 56. CPLR 5015(a)(2); Siegel, supra note 34, § 426, Enter. Corp., 140 A.D.2d 872, 873, 528 N.Y.S.2d at 751. 912, 913 (3d Dep’t 1988)). 57. Siegel, supra note 34, § 426, at 751 (citing 34. David D. Siegel, New York Practice § 108, at Oppenheimer v. Westcott, 47 N.Y.2d 595, 600–01, 202 (5th ed. 2011). 419 N.Y.S.2d 908, 909–10, 393 N.E.2d 982, 984 (1979) (noting that a non-party may bring a ple- 35. Id. § 108, at 204. nary action to vacate a judgment or move under 36. Barr et al., supra note 1, § 39:365, at 39-38. CPLR 5015(a) to vacate the judgment; the non- 37. Id. (citing In re Felix v. Herman, 257A.D.2d party here moved to vacate a judgment on the 900, 902, 684 N.Y.S.2d 62, 64 (3d Dep’t 1999) CPLR 5015(a) ground of fraud or misconduct)). (noting that laches may sometimes apply)). 58. Id. § 108, at 204. Follow 38. Siegel, supra note 34, § 108, at 203. 59. Barr et al., supra note 1, § 39:348, at 39-37. 39. Barr et al., supra note 1, § 39:342, at 39-35. 60. Siegel, supra note 34, § 108, at 204. 40. Siegel, supra note 34, § 108, at 203. 61. Byer’s Civil Motions, supra note 16, § 23:03, NYSBA 41. Id. at 255. 42. Id. 62. Id. 43. Id.; Byer’s Civil Motions, supra note 16, § 63. Siegel, supra note 34, § 427, at 752. 23:02, at 254. 64. Barr et al., supra note 1, § 39:410, at 39-42. on Twitter 44. Siegel, supra note 34, § 108, at 203. 65. Siegel, supra note 34, § 427, at 753. 45. Id. § 426, at 750. 66. Id. § 108, at 203. 46. Id. (citing McMahon v. City of New York, 105 67. Id. § 108, at 204 (“The present structure of www.twitter.com/nysba A.D.2d 101, 105–06, 483 N.Y.S.2d 228, 231–32 (1st CPLR 317, requiring the defendant to show Dep’t 1984)); Byer’s Civil Motions, supra note 16, that he did not get notice ‘in time to defend,’ § 23:02, at 253 (citing Ladd v. Stevenson, 112 N.Y. suggests that an excuse for the default is just 325, 332, 19 N.E. 842, 844 (1889). as necessary on a CPLR 317 as on a 5015(a)(1) 47. Siegel, supra note 34, § 426, at 751. motion.”) Stay up-to-date on the latest news 48. Id. 68. Barr et al., supra note 1, § 39:330, at 39-34. from the Association 49. Id.; Barr et al., supra note 1, § 39:420, at 69. Siegel, supra note 34, § 108, at 204 (citing 39-42; Smith v. Smith, 291 A.D.2d 828, 828–29, Wharton v. 241 Corp., 99 A.D.2d 979, 980, 473 736 N.Y.S.2d 557, 558 (4th Dep’t 2002) (“CPLR N.Y.S.2d 17, 19 (1st Dep’t 1984) (citing Taieb 5015(a) provides that such a motion shall be v. Hilton Hotels Corp., 60 N.Y.2d 725, 728, 469

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62 | January 2015 | NYSBA Journal 2014-2015 OFFICERS MEMBERS OF THE HOUSE OF DELEGATES

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Richter, Hon. Rosalyn * Yanas, John J. MEMBERS-AT-LARGE OF THE Robb, Kathy Ellen Bouton Smith, Sheldon Keith * Pfeifer, Maxwell S. EXECUTIVE COMMITTEE Rodner, Stephen B. FOURTH DISTRICT Spitler, Kevin W. Weinberger, Richard Rosner, Seth Coseo, Matthew R. Sullivan, Kevin J. THIRTEENTH DISTRICT Cox, James S. Sweet, Kathleen Marie James R. Barnes Rothenberg, David S. Behrins, Jonathan B. Hanson, Kristie Halloran Trachtenberg, Bethany Rothstein, Alan Cohen, Orin J. David Louis Cohen Jones, Barry J. Young, Oliver C. Safer, Jay G. Gaffney, Michael J. Michael W. Galligan Samuels, William Robert King, Barbara J. NINTH DISTRICT Marangos, Denise Kyriakopoulos, Efstathia G. Evan M. Goldberg Sarkozi, Paul D. Barrett, Maura A. Marangos, John Z. Martin, Trinidad Scanlon, Kathleen Marie Brown, Craig S. Martin, Edwina Frances Ira S. Goldenberg Nowotny, Maria G. Schwartz, Jodi J. Burns, Stephanie L. Mulhall, Robert A. Onderdonk, Marne L. Bryan D. Hetherington Sen, Diana Sagorika Epps, Jerrice Duckette Slezak, Rebecca A. OUT-OF-STATE Elena DeFio Kean * Seymour, Whitney North, Jr. Fay, Jody Wildgrube, Michelle H. Jochmans, Hilary Francoise Shamoon, Rona G. Goldenberg, Ira S. Edwina Frances Martin Silkenat, James R. Wood, Jeremiah Sheehan, John B. John S. Marwell Bruce J. Prager Oliver C. Young † Delegate to American Bar Association House of Delegates * Past President

NYSBA Journal | January 2015 | 63 THE LEGAL WRITER BY GERALD LEBOVITS Drafting New York Civil-Litigation Documents: Part XXXVIII — Motions to Vacate Default Judgments

n the last issue, the Legal Writer dant appears by serving an answer, lation expressly provides for a judg- continued the series on civil-liti- filing a notice of appearance, or mov- ment on a party’s failure to comply, gation documents with motions ing to extend the defendant’s time a judgment may be entered against I 12 to renew. The Legal Writer continues to answer (such as moving under the defaulting party. A court may the series with motions to vacate CPLR 2004 or moving to dismiss default a party for disobeying a default judgments. under CPLR 3211).5 court’s disclosure order or for will- Parties may be subject to a default fully failing to disclose information Default Judgments and Defaults judgment if they fail to respond to a that a party should’ve disclosed.13 One of the most frequently used pleading. Defendants may be subject A court may grant a default motions in civil litigation — in plena- to a default judgment if they fail judgment against a defendant who ry actions and special proceedings — to answer the complaint.6 Plaintiffs doesn’t appear for a calendar call or is a motion to vacate a default judg- or third-party defendants may be conference.14 ment. Before you understand the subject to a default judgment if they Parties are also subject to a default nuances of how to move to vacate don’t reply to a counterclaim.7 Fail- judgment if they fail to appear for a default judgment, you’ll need to ing to respond to an amended plead- trial.15 know about defaults and under what ure may subject the defaulting party The focus of this Legal Writer circumstances a party may be subject to a judgment.8 If a defendant “cross- column and the next isn’t on how to a default judgment. claim[s] against another defendant, to obtain a default judgment; the A party is in default when it cross-defendant is not required to focus is on how to move to vacate “fails to do something required to answer unless cross-defendant a judgment after you’ve defaulted. proceed with the prosecution or defense of an action. . . . If a party defaults, the non-defaulting party may seek a default judgment or Courts have a liberal policy to dismissal.”1 A court may issue a default judgment against a defen- vacate default judgments to dant that fails to appear in an action. When a plaintiff defaults, a court further justice and to give the may dismiss the action: “If a judgment of dismissal against [a] plain- parties their day in court. tiff results from plaintiff’s default, it may be considered a ‘judgment demands an answer.”9 If a cross- For more information about obtain- upon a default.’”2 A court may also claimant demands an answer and ing a default judgment, consult issue a default judgment against a a cross-defendant fails to answer, a CPLR 3215. “counterclaim defendant ([a] plain- cross-defendant may be subject to a With a few exceptions, defendants tiff), cross-defendant, or third-party default judgment.10 may not appeal from a default judg- defendant.”3 Violating a stipulation of settlement or order.16 Defendants must A party defaults in a number of ment may also subject a party to a first move to vacate the judgment or ways. default judgment or a judgment of order.17 If a court denies your motion After a plaintiff serves a defen- dismissal.11 If a party defaults on to vacate, you may appeal the court’s dant with process, the defendant a stipulation of settlement after an order.18 must appear in the action.4 A defen- action is commenced and the stipu- CONTINUED ON PAGE 56

64 | January 2015 | NYSBA Journal NYSBABOOKS

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