Comments on Recent Cases: December 2023

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Part of my work involves reading court decisions to keep abreast of how judges decide the types of cases I handle. Below, I share some thoughts on recent decisions.

Appeals Court Refuses to Impose Sanctions for Spoliation Trial Court Denied

The preservation of emails and other electronic documents is important in litigation.  The deletion of files, even for benign reasons, can result in punishment in litigation.  But a judge has wide discretion in imposing that punishment, and the penalties are not automatic.

For example, in a recent case before the state appellate court in Albany, New York, a plaintiff deleted files two years before a lawsuit arose.  The defendant asked the trial court to punish the plaintiff for the deletion by dismissing her allegations.  The judge refused and the appeals court refused to disturb the judge’s decision.  The appeals court noted the deference it normally affords trial courts in deciding sanctions issues, and also that the defendant failed to persuasively explain how the deletion hurt its defense.

Cases like this illustrate how spoliation of evidence issues are litigated.

Court Dismisses Direct Claim That It Says Should Have Been Brought Derivitavely

When executives at a company engage in misconduct, shareholders and LLC members can sue.  But when they do, they need to determine whether their claims are direct or derivative.  A direct claim is for damage a defendant does to the plaintiff.  A derivative one is for damage the defendant does to the company, which results in damage to shareholders like the plaintiff.

Courts take this distinction seriously.  For example, in a recent case before the state appellate court in Manhattan, a member in an LLC sued an executive for stealing fees and revenue for himself rather than permitting the LLC to collect them.  The appeals court dismissed that particular claim since it should have been brought derivatively and not directly against the executive.

Cases like this illustrate the importance of deciding whether to pursue claims derivatively.

Court Dismisses Interlocutory Appeal Upon Appealable Judgement

Judges make many different decisions during the course of a single lawsuit.  And many of those decisions may be the subject of an appeal.  Parties often wait until the end of a lawsuit to appeal the decisions with which they disagree, but sometimes they appeal “interlocutory” decisions during a case right away.  The timing does not always work, though.

For example, in a recent decision by the state appeals court in Manhattan, a defendant appealed an interlocutory order.  After filing its papers, the court issued a final decision in the case.  The appeals court on its own (without waiting for the plaintiff to ask) dismissed the appeal since the rules now required any appeal to be from the final judgment and not an individual interlocutory order.  The defendant now must start the appeal again, and it may have made sense for it to wait for the judgment before appealing.

Cases like this illustrate the procedure for appeals of interlocutory orders in litigation.

Court Cites New Law to Reinstate Challenge to Reverse Mortgage Foreclosure

Mortgages prompt a lot of litigation, much of which arises from complicated, technical rules.  Reverse mortgages involve even more technical rules since they involve both mortgage rules and the rules involving the administration of estates.  Complicating the process even further, these rules change over time.

For example, in a recent case before the state appeals court in Manhattan, a bank tried to foreclose on a reverse mortgage in 2009.  The dispute was litigated between the bank, a successor bank, and the family of the homeowner for years.  Although the trial court dismissed a challenge to the case last yer, the appeals court revived the challenge this year.  It did so, citing a new New York law meant to address abuses in foreclosure litigation, the Foreclosure Abuse Prevention Act.

Cases like this illustrate how complex mortgage litigation can be.