July 7, 2010

Special Reception Honoring the Hon. John M. Curran

The Commercial & Federal Litigation Section co-hosted a special event in Buffalo on June 24, 2010 to thank Honorable John M. Curran, outgoing Commercial Division Justice for the Eighth Judicial District, for his outstanding service in that role for the past three years. The Honorable John A. Michalek, the new CD Justice for the Eighth Judicial District, joined his predecessor and about 120 other members of the judiciary and bar and other friends at the outdoor festivities co-sponsored by the Bar Association of Erie County’s Commercial and Bankruptcy Law Committee. All were treated to a “roasting” by the judge’s brother, Damon Morey LLP partner Patrick B. Curran, who described himself as the only one in attendance who could not appear before Justice Curran!

Two Section Members, Heath J. Szymczak, a partner at Jaeckle Fleischmann & Mugel LLP, and Beth Ann Bivona, a partner at Damon Morey LLP and Chair of the Commercial and Bankruptcy Law Committee, planned the event for the Commercial & Federal Litigation Section and the Bar Association of Erie County, respectively. In addition, former Section Chair Sharon M. Porcellio, a partner with Ward Greenberg Heller & Reidy LLP, and Mitchell J. Katz, a partner with Menter Rudin &Trivelpiece, P.C. of Syracuse and Chair of the Section’s CD Committee, represented the Section and invited all attendees to join and participate actively in the Section’s activities.

April 22, 2009

2009 Annual Meeting

Commercial and Federal Litigation Section’s 2009 Annual Meeting

By: Anne B. Nicholson*

The Commercial and Federal Litigation Section’s Annual Meeting was held at the Marriott Marquis on January 28, 2009. The blistery weather conditions did nothing to detract from the success of the event in attracting an impressive crowd of litigators from across New York State. The program was led by Section Chair, Peter Brown, Baker & Hostetler LLP, and Program Chair, Jonathan D. Lupkin, Flemming Zulack Williamson Zauderer LLP. It featured a two-part MCLE program that addressed two “Litigation Hot Topics” increasingly faced by commercial litigators given our times: the Wagoner Rule as applied to suits by corporate plaintiffs and the ethical considerations implicated by interactions with non-party witnesses.

Panel Chair, Robert A. Schwinger, Chadbourne & Parke LLP, organized and moderated the first panel entitled “Let He Whose Executives Were Without Sin Cast the First Stone: Using Management Wrongdoing to Bar Suits by Corporate Plaintiffs and Debtors.” This program addressed the legal obstacles often faced when a company has been injured by wrongdoing that involved the participation of company management. The program highlighted the level of management participation in the complained-of misconduct as crucial in determining the ability of the company to sustain claims against third-party professionals who advised the corporation. The Section was thrilled to have as panelists the Honorable George Bundy Smith, Former Associate Judge, New York Court of Appeals and currently with Chadbourne & Parke LLP; Janice A. Payne, FINRA; Robert Sidorsky, Butzel Long; and Stephen P. Younger, Patterson, Belknap, Webb & Tyler LLP. Mr. Younger is also the President-elect Designate of the New York State Bar Association.

The second program, entitled “Ethical Issues in the Investigation of a Civil Lawsuit,” was organized by Panel Co-Chairs, Anthony J. Harwood, Labaton Sucharow LLP, and James M. Wicks, Farrell Fritz P.C. The Section was honored to have Professor Patrick M. Connors, Albany Law School, moderate the program and to have as panelists Michael Faillace, Michael Faillace & Associates, P.C.; Cheryl Smith Fisher, Magavern, Magavern & Grimm LLP; Geri S. Krauss, Krauss PLLC; and James Q. Walker, Richards Kibbe & Orbe LLP. The panel discussed whether a lawyer for a company may interview former employees and how that lawyer should ethically plan and prepare for the interview. The program also touched upon compensation issues that arise in the non-party witness context.

A reception and luncheon attended by more than 400 attorneys and judges immediately followed the excellent morning programs. During the luncheon, Section Chair Peter Brown recognized the attendance of more than 50 federal and state judges, including the Honorable Jonathan Lippman, newly appointed Chief Judge of the New York State Court of Appeals. Other distinguished guests graced participants in the luncheon with their presence, including Judith S. Kaye, former Chief Judge, New York State Court of Appeals, Sol Wachtler, former Chief Judge, New York State Court of Appeals, Michael B. Mukasey, former Attorney General of the United States, and Bernice K. Lieber, President of the New York State Bar Association. Mr. Brown also applauded the efforts of Program Chair Jonathan D. Lupkin for his successful organization of the event.

The highlight of the day was the presentation of the Section’s Stanley H. Fuld Award by the Honorable P. Kevin Castel, to his colleague on the United States District Court for the Southern District of New York, the Honorable Loretta A. Preska. Judge Preska’s impressive career has included work in private practice and over 16 years as a distinguished District Court Judge. In his opening remarks, Judge Castel spoke of Judge Preska’s wit and love of the law. These remarks segued perfectly to Judge Preska’s erudite discussion of the importance of consistency and predictability in the development of commercial law jurisprudence.

The Section’s Annual Meeting also featured the introduction of the Section’s officers for the 2009-2010 term. The following officers were duly elected by the Section’s membership: Vincent J. Syracuse, Tannenbaum Helpern Syracuse & Hirschtritt LLP, Chair; Jonathan D. Lupkin, Flemming Zulack Williamson Zauderer LLP, Chair-Elect; David H. Tennant, Nixon Peabody LLP, Vice Chair; Paul D. Sarkozi, Hogan & Hartson, Treasurer; and Deborah A. Kaplan, Baker Hostetler, Secretary.

* Anne B. Nicholson is an associate in the firm of Flemming Zulack Williamson Zauderer LLP.

June 20, 2008

House of Delegates Web Cast Saturday

House of Delegates Meeting to be Broadcast Live on the Web

For the first time ever, the New York State Bar Association’s House of Delegates meeting, which is being held in Cooperstown this Saturday, June 21, starting at 8:30 a.m., will be broadcast live on the Association’s Web site at www.nysba.org/JuneHOD. Interested members of the Association will be able to access the Webcast and watch the meeting as new President Bernice K. Leber (Arent Fox LLP) is sworn in and the House debates a full schedule of items of interest including reports from the Committee on Civil Rights, the Committee on Senior Lawyers and the Committee on Professional Discipline, as well as the Commercial and Federal Litigation Section report on electronic discovery.

The web cast will remain on the association’s site and be available for members to view at their convenience.

The Commercial and Federal Litigation Section report is scheduled for 11:30 a.m.

New Rules for Electronic Filing, ADR

Notice of new electronic filing and alternative dispute resolution rules

Effective June 15, 2008, all new Commercial Division cases in all Division Parts shall be electronically filed through the New York State Courts Electronic Filing System ("NYSCEF"). Specifically, in New York County, all Commercial Division cases should be commenced electronically, and all cases in which a Request for Judicial Intervention ("RJI") is sought after June 15, 2008 should be electronically filed. Furthermore, Justices in all Division Parts may request that Division cases that were previously filed in hard copy format be converted to electronic filing status; in such instances, counsel will be informed either by the Justice or the E-Filing Office. In order to electronically file documents, attorneys will need to register for IDs and passwords, which may be done by contacting the E-Filing Office at 646-386-3610 or newyorkef@courts.state.ny.us.

Pursuant to the electronic filing rules (Uniform Rule section 202.5-b), courtesy hard copies must be submitted in electronically filed cases and beginning on June 15, 2008, the courtesy copy must include the following legend (indicating the number of the document as shown in the e-filed docket of the case in NYSCEF): COURTESY COPY. THIS DOCUMENT HAS BEEN E-FILED AS DOCUMENT NO. __. Courtesy copies will be discarded by court staff upon the completion of judicial action, unless counsel states on the first page that "COUNSEL WILL RETRIEVE THIS COPY AND REQUESTS RETENTION," in which case the courtesy copy will be retained in the Motion Support Office Courtroom(Room 130) for two weeks.

Please note that although electronic filing is not mandatory, it is expected that attorneys will cooperate with the Commercial Division Justices in their effort to improve the efficiency of court operations and to bring the courthouse into the age of advanced technology. If an attorney wishes not to participate in electronic filing in a particular action, he or she shall address the subject with the Division Justice assigned to the action and all other parties at a conference or as otherwise directed by the Justice. The E-Filing Office of the Commercial Division, New York County, is located in Room 119 of the New York County Courthouse, 60 Centre Street, Manhattan. The office offers each week a two-hour training course in the NYSCEF electronic filing program at no charge, for which two CLE credits are awarded. All interested attorneys and staff are encouraged to attend a training course.

Beginning later this year, pursuant to procedures that will be announced, in all Commercial Division cases that are not electronically filed, counsel submitting motion papers, including papers on motions brought on by order to show cause, shall submit with the papers a computer diskette bearing an exact copy of the papers in PDF format. The papers will be included in the Supreme Court Records On-Line Library ("SCROLL") and will be available on the general website of the Supreme Court, Civil Branch, New York County. In addition, on June 15, 2008, the new rules issued by the Alternative Dispute Resolution Program of the Commercial Division become effective. Under the new rules, mediation remains mandatory. The initial mediation session(s)shall last for four hours and are free of charge; thereafter, if the parties find it beneficial to continue mediation, the Commercial Division mediator must be compensated as set forth in the ADR Rules.

Further information, including a copy of the applicable electronic filing procedures and ADR rules, is available in the New York County section of the website of the Commercial Division, at www.nycourts.gov/comdiv.

June 29, 2007

Should We Reconsider Corporate Criminal Liability?

[Editor’s Note: On January 24, 2007, the Commercial and Federal Litigation Section of the New York State Bar Association Awarded its Stanley H. Fuld Award to Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York. The following remarks were delivered by Judge Kaplan upon his acceptance of the Fuld Award.]

By Hon. Lewis A. Kaplan

Thank you to the Commercial and Federal Litigation Section for honoring me with this wonderful award. I place a very high value on your recognition because I am such an admirer of the wonderful work you have done for so many years.

It is humbling to be mentioned in the same breath as the late, great Stanley H. Fuld, let alone to receive an award named in his memory. As you have heard, Judge Fuld was a giant. But he was not simply a superb legal craftsman. As Judge Jack Weinstein, one of Judge Fuld’s first law clerks, said, Judge Fuld “was at that cusp between an older style of looking at the law which was more protective of property rights and the more flexible people-oriented law we have had since World War II.”1 Judge Fuld repeatedly took positions, often in dissent in his early years and later for majorities of the Court of Appeals, that espoused protection of individual rights. The values that animated his jurisprudence are at least equally important today. In sum, Judge Fuld was everything a judge ought to be. He was brilliant. He was wise. And he understood that law exists to better the lives of everyone -- rich and poor, black and white, advantaged and disadvantaged. His life is an example to all of us.

My first thought when I contemplated speaking to you on this occasion, was this: as much as I admire those who can give humorous and entertaining talks, I am not one of them. It’s a mistake to try. So I apologize in advance for turning to something more serious and, I hope, something of particular interest to this section.

Over the course of my career, we have seen a sea change in the use of the criminal law in the business world.2 When I was a little younger than I am now, government dealt with business misconduct principally by regulation and civil litigation. When there were criminal investigations, they typically proceeded in what by now is an old fashioned way. The government got a tip or a cooperating witness. Grand jury subpoenas went out. Witnesses were turned or immunized. Cases were built. Sometimes indictments were returned. Even where corporations or other business entities were indicted, the potential consequences of conviction usually were such that mounting a defense was a feasible course of action.

That has changed. For a variety of reasons that are familiar to many of you, the return of an indictment against many public companies and other prominent organizations would threaten their very existence, regardless of whether they were guilty. In those cases, defending against criminal charges is not a viable option. The entity in such a case has little choice – it must make a deal with the government that avoids a criminal prosecution. This frequently means waiving the attorney-client privilege, firing employees whom prosecutors regard as culpable, paying large fines, and often accepting major changes to the manner in which the entity does business. We thus have moved, in some cases and in some degree, from a system in which prosecutors prosecuted and courts and juries decided guilt or innocence to a system in which prosecutors as a practical matter threaten business entities with unbearable extrajudicial consequences and thus exact acquiescence in the government’s demands.

This is made possible by the conjunction of two principles. The first is the proposition that a corporation is a legal person and thus capable of committing a crime. The second is the fact that a corporation, however large, is guilty of a crime if even a single agent commits a prohibited act with the requisite mental state as long as that act was intended to benefit the corporation and was directly related to the performance of the kind of duties the agent had the general authority to perform.3 \

These principles, neither of which is self evident, have not been with us from the beginning of time. Blackstone said that corporations are incapable in their corporate capacities of committing crimes, although their members may be criminally liable in their individual capacities.4 Nevertheless, these principles have been with us for a very long time. The Supreme Court accepted the constitutionality of imputing criminal responsibility to corporations on agency principles in 1909.5

The concept of the corporation as a legal person is older than that. Thus, the environment in which corporate criminal liability became a matter of black letter law was very different from today. Certainly the Supreme Court, when it upheld the respondeat superior theory of criminal liability 98 years ago, could not have conceived of anything like the Arthur Andersen case. It is, I suggest, time for an objective consideration of whether any change is warranted in present circumstances.

Let me begin with some disclaimers.

First, these remarks are not about any pending case or any case that recently was dismissed.

Second, I have no more sympathy for corporate or white collar crime than for any other variety. When people commit crimes, they should be punished, regardless of whether their collars are white or blue. Moreover, crimes committed by white collar criminals out of a studied calculation of likely costs and benefits of engaging in the criminal behavior perhaps are especially reprehensible.

Third, I am not squeamish about the fact that the criminal process often, and quite appropriately, presents defendants and prospective defendants with choices between unpalatable alternatives. That is what happens whenever a criminal defendant accepts a plea bargain, and plea bargaining is not the only circumstance in which it occurs. But it is important to recognize that corporations and other business organizations are different than individuals and that the difference is relevant to the extent to which they should be treated in exactly the same way.

Although corporations are regarded by the law as persons, they are not persons in the

same sense as those of us that live and breath. They are collections of individuals and, often, other organizations that are bound together by complex webs of contracts and legal rights and duties. At a minimum, these collections include stockholders, directors, officers, and employees.

One consequence of this difference between corporations and individuals is that a criminal conviction of a corporation does not punish the wrongdoers. It punishes the stockholders and, in some cases, other corporate constituents. These groups bear the consequences regardless of whether they have any culpability. You do not have to look any further than the thousands of innocent former partners and employees of Arthur Andersen to see what I mean. But there are other, perhaps less obvious, examples. In the Adelphia scandal, to mention one, the bankrupt company, as part of a deal to avoid indictment, agreed to pay $715 million to a government-established restitution fund. This deprived the bankruptcy estate of a vast sum that otherwise would have been distributed in accordance with the priorities applicable in bankruptcy. Some creditors were disadvantaged for the benefit of ultimate beneficiaries of the government’s fund. While there was no error in the bankruptcy court’s approval of the settlement with the government,6 the case illustrates the point that criminal prosecutions of corporations may injure innocent constituencies even more remote than stockholders and employees.

I do not question the application of conventional agency principles in the civil context. When the constituents of a corporation or business entity join together in a collective effort to make a profit, it seems entirely fair to require that the entity compensate anyone whom its actions injure, just as it is entirely fair to require that the entity pay its debts. Such compensation is a part of the collective enterprise.

The criminal side may, and I emphasize the word “may,” be different. Most say that the criminal law serves a number of purposes. Criminal convictions afford an institutionalized means of exacting retribution. The punishment deters others from engaging in similar offenses. In some cases, as where an individual is imprisoned, it disables the offender from committing other crimes. So let us consider corporate criminal liability in terms of these purposes.

The first question is whether convicting corporations of crimes serves the purpose of institutionalizing vengeance. Certainly one can understand that punishing living and breathing criminals for their misdeeds satisfies the basic human desire to see the guilty pay for their crimes. Indeed, criminal law developed in part to avoid private vengeance by satisfying that desire. But that doesn’t seem to be much of a concern where the offender is a legal entity that is a “person” only in a metaphorical sense. And I wonder whether people who are victims of crimes committed by agents of a corporation feel better when the corporation is convicted of a crime than they would feel if the guilty individuals alone were convicted.

The case for corporate criminal liability appears differently when viewed from the standpoint of general deterrence. The empirical question is whether a board of directors or corporate managers would be more likely to ensure that subordinates conduct themselves in accordance with law if the company were subject to criminal conviction than they would be if the company could not be prosecuted criminally. It is an interesting question to which I do not pretend to have the answer. There is an arguable case, however, for the proposition that corporate criminal liability may have a deterrent effect on other companies, but I’m not sure it is something that is so obvious as to be taken on faith.

Specific deterrence is yet another matter. I wonder whether convicting a corporation of a crime has much effect, one way or the other, on the question whether it will engage in wrongdoing in the future unless, of course, the effect is to put it out of business. Certainly conviction of corporate agents who committed the wrongdoing would take them out of the picture quite effectively regardless of whether the corporation is prosecuted.

These are only some of the relevant considerations, and I quickly concede that I have only scratched the surface of a very complicated subject. I confess also that I do not have a view as to whether any change in the current state of the law would be advisable. I do suggest, however, that this is an appropriate subject for consideration, particularly in light of the devastating consequences of potential criminal liability that we first have seen only recently. This Section and this Association are well suited to play an important part in that process, and I urge you to do so.

I cannot close without adding a word of thanks to my family, who are entitled to a good deal of any credit for anything that I may have accomplished. My bride of three very happy years, Lesley Oelsner, supports my judicial service with the ferocity of a tiger, a ferocity born of her own passionate commitment to justice and public service. My late wife, Nancy, encouraged and supported my going on the bench and was my partner for 33 wonderful years. My parents, though I disappointed at least my father in not becoming a doctor, encouraged my legal career. My father did so quite inadvertently by making a refugee’s admiration of our legal system clear to me even at a very young age, and my mother did the same through her concern for the powerless. And my mother-in-law, Doris Gelberg, who I am pleased to have here with us today, has been a tower of strength in all things for more than 40 years.

Finally, let me once again express my sincere gratitude to the Section for the high honor it has conferred upon me. I shall always cherish it, and doubly so for the identities both of the donor and of the exemplar of judicial achievement for whom it is named.

1 Douglas Martin, StanleyFuld, Former Judge, Is Dead at 99, New York Times A21:1 (July 25, 2003).

2 See generally, e.g., Leonard Orland, The Transformation of Corporate Criminal Law, 1 Bklyn. J. Corp., Fin. & Comm’l Law 45 (2006).

3 See Leonard B. Sand, et al., Modern Federal Jury Instructions, Instruction 2-7.

4 1 William Blackstone, Commentaries on the Laws of England 464 (1765).

5 New YorkCentral and Hudson River R.R. Co. v. United States, 212 U.S. 481 (1909).

6 Ad Hoc Adelphia Trade Claims Comm. v. Adelphia Comm’ns Corp., 337 B.R. 475 (S.D.N.Y.), appeal dismissed as moot sub nom. In re Adelphia Comm’ns Corp., Nos. 06-1417-BK, 06-1738-BK, 2006 WL 3826700 (2d Cir. Dec. 26, 2006).

Judge Kaplan’s remarks were originally published in the NYLitigator, Vol 12, No. 1 (Spring 2007).

April 6, 2007

Ten Best and Worst Practices of In-House and Outside Counsel

Five Best Practices of Outside Counsel

1. Responsiveness (returns calls same day, if possible);
2. Values the case appropriately and puts in the commensurate effort - we don't need
an A+ job on garden variety types cases;
3. Understands and executes our early case assessment and resolution philosophy;
4. Knowledge of our Company;
5. Reduced blended hourly rate.

Five Worst Practices of Outside Counsel

1. Duplication of work by firm attorneys and paralegals;
2. Instead of using junior associates, using experienced paralegals cost-effectively;
3. Partner not properly supervising an associates work and being billed for unfocused
4. Academic memos of law rather than a "cut to the chase" bottom line advice;
5. Inflated photo copying charges that become a profit center.

Best and Worst Practices of Outside Counsel

1. Evaluation of cases early, including precedential concerns and collateral estoppel, res
judicata issues. If not done, a "worst" practice:

2. Preparation of cases for trial including.a realistic cost/benefit analysis and the realistic call
on internal corporate resources will be through trial. If outside counsel does not focus on
impact of trial prep on a corporation, this becomes a "worst" practice;

3. Being realistic regarding settlement. Most cases settle. As a result, it is a "worst practice" if
outside litigators do not have realistic dialogue with client(s) about the need for the client to
consider a settlement. Also, it is a "worst practice" if an outside litigator tells the judge
he/she does not have "authority" to settle a case. Judges do not want to hear this if they ask
the question. A "best practice" would be for outside counsel to insist that the client provide
a "number," or a "range" and allow the trial lawyer to answer the judge's query;

4. Communications are crucial If an outside lawyer communicates regularly and whenever
important, that is a best practice. The communication can be electronic. What is a worst
practice is waiting until the last minute or not communicating with the in house lawyer
understanding that within the organization the in house lawyer may have several reporting
obligations which take time - to get a result/authority and so forth;

5. It is a "best practice" if the outside lawyer understands a fundamental fact: The in house
lawyer/legal organization is, unlike the law firm considered a significant "cost center" by
management. This affects perception of the role of lawyers in numerous ways;

6. It is a worst practice if the outside lawyer communicates with the media without first having
a candid and thorough discussion with the in house lawyer as to how the corporation wants
media relations handled. Do they have a PR department. Is there is an individual designated
to be company spokesperson. Similarly, it may be a best practice if in a high profile case,
the outside lawyer communicates the benefits to the entity of his or her conducting all
communications with the media;

7. On billing, a "worst practice" is the so-called automatic periodic increase in
partner/associate billing rates without discussion/understanding by the in house client;

8. On billing, it is a "worst practice" if outside litigators assume routinely that ordinary course
of business vendor invoices should be sent directly to the in house lawyer. It may take
inordinate delay given the accounting practices of the corporation to get such invoic s paid
timely. This should be discussed candidly between inside and outside counsel on how to
handle; and

9. It is a "best practice" for outside lawyers to communicate with in house lawyers on any
(significant) change in personnel - who will handle a case at the law firm.


(1) Asking that pleadings be provided for review well before they are due to be served and then not providing input until the day before (or often hours before) they are due to be served

Thinking about the relationship between in-house and outside in best/worst terms just caused me list my gripes (supra), I'm afraid, which didn't feel particularly productive. Instead, I offer several topics that I would be interested to have a panel discuss:

(1) Things that would make it easier for in-house counsel to review bills

- categories on the insurance model?
- abbreviations or not?
- things that delay the review; i.e., that cause in-house counsel to stop during the bill

(2) Perspectives on staffing

- if shifting work to a junior partner (on down to a junior associate) makes sense to
me as outside counsel, is it preferred that I just go ahead or should we discuss it
expressly in advance?

(3) Feedback

- are there best practices for outside counsel to check in to see how we're doing?
- how often?
- how long a session?
- in person or by telephone?
- questions that should be asked?

(4) Budgeting

- what's the reaction to direct questions about how a matter is budgeted?
- perfect product vs. adequate product - is that something that in-house would prefer
to be expressly discussed up front?

March 7, 2007

Commercial Division Law Report

In case you have not seen it, the most recent issue of the CDLR may be found at http://www.courts.state.ny.us/comdiv/law_report.htm. Our committee receives prominent mention on page 3. Kudos to all.

Jonathan Lupkin

The Law Report

Has anyone had a chance to read the most recent edition of The Law Report, which was edited by the Section? If so, what are your thoughts?