Comments on Recent Cases: June 2024

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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.

Court Denies Default Judgment Where Plaintiff Failed to Submit Sufficient Evidence

If a party does not answer a complaint, a litigant may seek a default judgment against it. But that process is not automatic; the litigant must submit proof that they are entitled to judgment. Failure to do so may result in a denial of a default judgment.

For example, in a recent case before the state appeals court in Manhattan, a plaintiff sued to collect on a debt. One defendant successfully convinced the court to dismiss the case because the interest rate on the debt was illegally high. But the plaintiff sought to collect against different defendants who did not answer. The court denied the default judgment, even though the defendants should have, but did not appear, since the plaintiff failed to actually submit documentary evidence of the debt. This is frustrating to any lawyer who feels like they lost even with no opponent.

Cases like this illustrate the burden a plaintiff carries in seeking a default judgment.

Court Eventually Affirms Dismissal of Claims Against LLC Members

People form limited liability companies to, among other things, limit their liability. Still, plaintiffs may still sue the members of an LLC, hoping to convince a court that the members bear liability or to convince the members that they should settle a claim rather than litigate. Even when the members prevail, it may come after lengthy litigation.

For example, in a recent case before the state appeals court in Manhattan, a plaintiff sued a property owner after she sustained an injury on the property. The property owner was a limited liability company, and the plaintiff sued both the company and minority members of another limited liability company that owned the property owner. The members asked the court to dismiss the case against them and the court did so without discovery. The appeals court affirmed, citing the principle that liability does not extend to members solely by virtue of their membership in a limited liability company. Still, the lawsuit began in 2020, the trial court decision was issued in 2023, and the appellate decision was issued in June 2024, so while the members prevailed, it took years of litigation to do so.

Cases like this illustrate how the corporate form’s limitations on liability may not insulate parties from the burden of litigation.

Court Holds Gross Negligence Can Be Decided on Summary Judgment

Litigants often argue to the court that a trial is not necessary because the claims fail as a matter of law or because all of the evidence in the case can only support one side.  But there are some kinds of claims that are difficult to dismiss before a trial because the evidence is almost always imprecise and requires a judge or jury to evaluate credibility.  Employment discrimination claims, for example, often involve competing statements by witnesses, and so it usually cannot be said that all of the evidence supports only one side.

A recent decision by the state appeals court in Manhattan held that “gross negligence” is not the kind of issue that requires a trial.  Although the plaintiff alleged that a trial was needed to determine whether the defendants failure to check whether it was sending emails to the correct addresses met the “gross negligence” standard, the court held that, as a matter of law pursuant to the standard cited in the complaint, it was not.

Cases like this provide support to defendants in negligence cases who will argue trials are not necessary to defeat the claims against them.

Court Enforces Duty to Defend

Contractual parties often agree who will defend the two in the event they are sued by a third party.  Such an agreement conveys a “duty to defend” that typically arises when one party “tenders” to the other notice that a defense is necessary.  But some times it is unclear when this duty is triggered.

For example, in a recent case before the state appeals court in Manhattan, Time Warner and Nokia entered into an agreement in which Nokia said it would defend Time Warner if it got sued for certain claims.  Sprint sued Time Warner and Time Warner notified Nokia, but Nokia did not defend it.  Five years after a jury found in favor of Sprint, Time Warner sued Nokia, claiming that Nokia should have defended it.  The appeals court agreed, noting that a “formal tender” of the defense was not necessary to trigger the duty once Time Warner sent notice of the lawsuit to Nokia.

Cases like this illustrate how courts enforce a duty to defend.