New York State Law Digest: September 2024

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New York State Law Digest: September 2024

CASE LAW DEVELOPMENTS

Relation-Back Doctrine Applied Even Where Original Co-Defendant Was No Longer Party When Plaintiffs Sought to Add New Defendant “United in Interest”

Second Department Cautions That Its Ruling Was Not Meant to Imply that It Was Somehow Changing Existing Law

We have previously discussed the relation-back doctrine involving parties “united in interest.” Thus, a claim asserted against a (new) defendant in an amended pleading will relate back to claims previously asserted against an existing defendant if all three of the following conditions are met:

Both of the claims must arise out of the same conduct, transaction, or occurrence;
Both parties must be united in interest such that the co-defendant can be charged with notice of the institution of the action and will not be prejudiced thereby; and
The co-defendant must have known, or should have known, that but for plaintiff’s mistake, the co-defendant would have been included in the original pleadings.

CPLR 203(b), (c). See Buran v. Coupal, 87 N.Y.2d 173 (1995).

Significantly, generally, the doctrine can only apply when that original co-defendant has already been timely sued and continues to be a defendant in the case. Simply stated, the new defendant must relate back to an existing defendant united in interest.

Bisono v Mist Enters., Inc., 2024 N.Y. Slip Op. 03873 (2d Dep’t 2024) presented an “unusual set of facts,” in which the court applied the doctrine. In the process, Justice Dillon pro- vided his usual comprehensive analysis of the subject area of law.

In March 2016, the plaintiff Luis Bisono was driving his car with the plaintiff Yaneli Bisono as a passenger, when a gust of wind blew open the door of a fixed dumpster on the street, causing that door to strike the car as it passed. The car then spun and hit a parked vehicle. In 2017, the plaintiffs brought this action against various defendants, Mist, Presco and Yakov Eisenbach, alleging that the plaintiffs’ injuries were caused by the defendants’ negligence in the ownership, operation, maintenance, control, and placement of the dumpster. Mist and Presco answered; however, Eisenbach’s counsel wrote to plaintiffs’ counsel seeking a discontinuance based on the claim that Eisenbach had no legal responsibility. In December 2017, plaintiffs’ counsel signed off on a Stipulation discontinuing the action without prejudice as against Eisenbach only.

In 2019, the plaintiffs filed a supplemental summons and amended complaint without seeking leave. The amended com- plaint named Mist, Presco, Eisenbach, Jozefko and Design. Later in 2019, Mist and Presco moved for summary judgment. Separately, after the limitation period had expired, and con- ceding that the earlier filed amended complaint was a nullity (having not been amended either as of right or with leave), the plaintiffs sought leave to amend the complaint to add both Eisenbach and Design as party defendants. The plaintiffs argued that newly discovered evidence reflected the involvement of Eisenbach (Design’s CEO) and Design, including, among other things, that Eisenbach was the owner of the dumpster and that a permit was issued to Design, listing Eisenbach as the contact person. The plaintiffs claimed that although the limitation period had expired as against Design, the relation-back doctrine applied. The trial court granted Mist’s and Presco’s summary judgment motion and granted plaintiff’s motion to amend with respect to Eisenbach but denied it as to Design.

The Second Department first analyzed whether the three Buran conditions noted above had been met, concluding that they had. Thus, it ruled that the trial court erred in denying leave to amend the complaint as to Design, finding that the proposed amended complaint was not patently devoid of merit and Design was not unduly prejudiced by the delay in adding it as a party.

Justice Dillon noted, however, that there was a significant complication here that needed to be addressed “so that the ultimate conclusion of this appeal not be construed as changing the well-worn rules of the relation-back doctrine.” And that was the fact that in order to apply the relation-back doctrine, the claim against Design had to relate back to a claim against an existing co-defendant. Here, that defendant Eisenbach, was no longer a party in the case when the motion for leave to amend was made:

[A]ny party to be added after the expiration of the applicable statute of limitations must be tethered to another party against which claims were timely interposed, and that preexisting party must itself be an active defendant at the time the relation-back doctrine is applied. Here, however, Eisenbach—the preexisting party—had been discontinued from the action by the plaintiffs, though under false or mistaken pretenses that were not discovered until later. Technically, therefore, when the plaintiffs sought leave to amend the complaint to add Eisenbach and Design as party defendants, the statute of limitations had already expired as to both of them; Eisenbach was no longer an existing party within the statute of limitations to which Design could be tethered. Further, for Eisenbach to be properly re-added to the action after the expiration of the statute of limitations, he would have to relate back to yet another party—a double relation-back—although no circumstances for his own relation-back are shown on this record (citations omitted).

Id. at *16–17.

Nevertheless, the court held that the relation-back doctrine applied here. It found significant the fact that no one opposed plaintiffs’ motion seeking to add Eisenbach after the expiration of the statute of limitations. Similarly, no one argued that Eisenbach was equitably estopped from asserting the limitations defense because his counsel had obtained the discontinuance of the action as against him by misrepresenting or mistaking relevant facts. In addition, no party appealed the order granting the plaintiffs’ unopposed motion for leave to amend the complaint to re-add Eisenbach as a defendant in the action:

Therefore, this appeal is postured where Eisenbach, though technically untimely, was added to the action via an amended complaint which, absent opposition and an appeal of that issue, is now the law of the case. So postured, Design may be added as a defendant to the action, beyond the statute of limitations for Design, by virtue of the relation-back to Eisenbach who has again become an existing presence in the action in a manner that is both uncontested and the law of the case (citations omitted).

Id. at *18–19.

Justice Dillon stressed that the decision was the product of the unique fact pattern here and should not be construed as a modification of the relation-back doctrine or that it can apply where the original defendant to whom the claim relates “is not a timely, existing party in an action. Decisional authorities re- quire that there be a preexisting party against whom there is a timely claim. The result here, while very unusual, is instead a product of its peculiar circumstances . . .” Id. at *21.

While the Second Department bailed out the plaintiffs in this case, the Bisono court offered what the plaintiffs should have done. They should have sought to vacate the stipulation of discontinuance given to Eisenbach.

Certainly, grounds for vacating that stipulation of dis- continuance would have been compelling, given the plaintiffs’ reliance upon the misinformation from Eisenbach’s counsel about material facts which misled the plaintiffs into agreeing upon the discontinuance of those claims in the first instance. Upon any such vacatur, had it been successfully sought, Eisenbach would have been restored to the action under the original complaint, and would have been a timely, existing defendant to whom the claims against Design could then relate back (citations omitted).

Id. at *17–18.

Where Defendant’s Residence and Business Address Are the Same, the Litigation-Related Information Restriction Under CPLR 308(2)’s Mailing Requirements Does Not Apply

Legislative Intent Was to Deem Mailing to Defendant’s Residence Primary Over Defendant’s Place of Business

In the Digest, we have stressed the importance of adhering strictly to the dictates of service statutes. For example, CPLR 308(2) permits the use of leave and mail service in the first instance for service on a natural person. The two-step process involves first to leave the initiating pleadings with a person of suitable age and discretion at the defendant’s actual place of business, dwelling place, or usual place of abode. The second step requires a mailing either to the defendant’s last known residence or by first class mail to the defendant’s actual place of business. Significantly, if resorting to the latter, the envelope containing the pleading must be marked “personal and confidential” and cannot indicate that it is from a lawyer or concerns an action against the person to be served.

What happens if the mailing address for a defendant’s residence and business are the same? Which mailing requirements apply? Specifically, do the restrictions concerning litigation-related information related to a mailing to a business address apply? In what the First Department termed as an issue of first impression, it ruled in AMK Capital Corp. v. Plotch, 214 N.Y.S.3d 10 (1st Dep’t 2024), that the restrictions concerning litigation-related information do not apply.

The court first acknowledged that “personal jurisdiction is not acquired pursuant to CPLR 308(2) unless both the delivery and mailing requirements have been complied with”; the mailing requirement is to be strictly construed; and the failure to comply with that requirement “is a jurisdictional defect warranting a finding as a matter of law that service thereunder was invalid.” In this case, the failure to effect proper service would result in the vacating of a foreclosure judgment and the dismissal of the complaint.

The envelope here did not indicate that its contents were “personal and confidential” and it “bore information revealing that the contents were litigation-related.” Thus, if defendant’s address were only a place of business, the mailing would fail. “The question is whether the business purpose overrides the residential purpose of defendant’s address, rendering the mailing herein invalid as a matter of law.” Id. at 13.

The court rejected the defendant’s argument that the business mailing restrictions took precedence over the residential mailing requirements because “[t]his position would improperly render meaningless one provision in favor of the other for no apparent reason other than to benefit one side over the other (citation omitted).” Id. at 14. Instead, the court answered the question by first looking “closely” at the order of the statutory language, concluding that by placing the language referencing mailing to the defendant’s last known residence before the phrase for the defendant’s actual place of business in CPLR 308(2), the legislative intent was

to deem mailing to a defendant’s residence to be primary over a place of business. The amendment providing for mailing to a place of business was to ameliorate the inability to locate a defendant’s residence. Thus, mailing to a residential address is primary over a mailing to a place of business, an option that was intended to be secondary in effectuating service of process. Based on the foregoing, where a defendant’s address is both residential and a place of business, the address may be deemed as a residential one in the affidavit of service, permitting a mailing in accordance with CPLR 308(2)’s residential mailing requirements. Un- der these circumstances, the mailing at issue herein did not violate CPLR 308(2)’s mailing requirements.

Id.

Second Department Holds That Facebook and Similar Social Media Platforms Constitute Public Forums Under the Anti-SLAPP Statute

Nevertheless, the Statute Did Not Apply to the Facts of this Case Because Defendants’ Statements on Plaintiff’s Facebook Page Concerned a Purely Private Matter

We have previously referenced anti-SLAPP laws, which pro- vide defendants a way to dismiss meritless retaliatory lawsuits filed against them for exercising speech, press, assembly, petition, or association rights. In 1992, Civil Rights Law §§ 70-a and 76-a, and CPLR 3211(g) and 3212(h) were added with respect to “actions involving public petition and participation.” They allow for the imposition of costs, attorneys’ fees, and compensatory and punitive damages against a plaintiff who files a SLAPP suit. The statute permits defendants to “maintain an action, claim, cross claim or counterclaim to recover damages, including costs and attorney’s fees, from any person who commenced or continued such action.” Civil Rights Law § 70-a(1). Amendments in 2020 expanded the protection of the statute to a broader class of individuals and claims. Thus, they defined a SLAPP suit as “a claim based upon: (1) any communication in a place open to the public or a public forum in connection with an issue of public interest; or (2) any other lawful conduct in furtherance of the exercise of the constitutional right of free speech in connection with an issue of public interest, or in furtherance of the exercise of the constitution- al right of petition.” Civil Rights Law § 76-a(1)(a). They also provided that “‘[p]ublic interest’ shall be construed broadly, and shall mean any subject other than a purely private matter.” Civil Rights Law § 76-a(1)(d).

In Nelson v. Ardrey, 2024 N.Y. Slip Op. 04147 (2d Dep’t August 7, 2024), the issue was whether Facebook and other social media platforms constituted “public forums” under the statute. The Second Department noted that “[t]he term ‘public forum’ is traditionally interpreted as a place that is open to the public where information is freely exchanged,” and has “evolved” to include podcasts and internet forums featuring customer reviews of businesses. The court concluded that Facebook has been a “public forum” for almost 20 years:

From its infancy, when its membership was restricted to Harvard students and was known as “thefacebook,” Facebook has provided each user with a virtual “wall” where each user can share on his or her wall, or any other public wall, his or her thoughts, pictures, opinions, and links to other websites and articles. As such, Facebook has, from inception, had the appearance and function of a forum. Thereafter, on September 26, 2006, Facebook became available for access and use by every person over the age of 13 years old with a valid email address, reporting over a billion monthly users by the end of 2012. As of the writing of this opinion, Facebook is the third most popular website in existence (citations omitted).

Id. at *6.

The court emphasized that the legislative history supported such a conclusion and “reveals that the Legislature intended to include Facebook and other social media platforms within the meaning of public forum.” For further support, the court pointed to a federal court decision applying New York’s anti-SLAPP statute finding that social media platforms, such as Facebook, constituted a “public forum” and to the courts of other states (e.g., California, Nevada, Connecticut) applying similar statutes.

Nevertheless, the court held that the anti-SLAPP statute was inapplicable here for another reason. In this case, the defendants had posted a series of responses to a post on the plain- tiff’s personal Facebook page alleging that the plaintiff had sexually abused one of the defendants when she was four years old. The statements therefore

concerned “a purely private matter” and were “directed only to a limited, private audience.” . . . The statements here were private allegations of the plaintiff’s alleged crimes. The record shows that the defendants made these statements on what was a limited personal Facebook post concerning the birthday of the plaintiff’s daughter and not on a forum of broader scope. Under these circum- stances, the content of the challenged statements was not within the sphere of public interest (citations omitted).

Id. at *9–10.

Defendant Entitled to Collateral Source Hearing for Purpose of Establishing Availability of Insurance That Plaintiff Could Obtain Under the ACA

Ruling Meets Primary Objective in Enacting CPLR 4545 to Eliminate Windfalls and Double Recoveries for the Same Loss

CPLR 4545, commonly known as the collateral source rule, regulates evidence of collateral source payments in personal injury, property damage, and wrongful death actions. Its enactment represented a modification of the common law rule, which permitted a plaintiff, who was reimbursed for his medical expenses through a health insurer, to nevertheless recover the full amount of those costs from a tortfeasor in a third-party action. CPLR 4545 provides that to the extent a court finds that a medical expense (as defined) “will, with reasonable certainty, be replaced or indemnified from any such collateral source, it shall reduce the amount of the award by such finding, minus an amount equal to the premiums paid by the plaintiff for such benefits for the two-year period immediately preceding the accrual of such action and minus an amount equal to the projected future cost to the plaintiff of maintaining such benefits.”

The issue of apparent first impression in Liciaga v. New York City Tr. Auth., 2024 N.Y. Slip Op. 04257 (2d Dep’t August 21, 2024), related to the effect of the Patient Protection and Affordable Care Act (ACA) on collateral source offsets. Specifically, the court was asked to resolve “whether a defendant may be entitled to a collateral source hearing pursuant to CPLR 4545 for the purpose of establishing that an uninsured plain- tiff’s future medical expenses will, with reasonable certainty, be covered in part by a private health insurance policy, as long as the plaintiff takes the steps necessary to procure the policy.” While the statute does not specify a procedure that the trial court is to use to make the collateral source deductions, trial courts have traditionally held posttrial evidentiary hearings.

In Liciaga, the plaintiff was struck in the back by a railroad tie while riding his bicycle through an unguarded drop zone (an area where railroad ties removed on elevated subway lines were lowered to the ground). The plaintiff, 23 years old at the time of the accident, allegedly sustained multiple fractured vertebrae in his thoracic spine and a severed spinal cord, resulting in him being permanently paralyzed below the T7 level. Following a damages trial, the jury awarded the plaintiff $9,000,000 for past pain and suffering, $60,000,000 for future pain and suffering for 48 years, $1,174,972.38 for past medical expenses, and $40,000,000 for future medical expenses. The defendant moved to set aside the verdict on various grounds, but as relevant here, sought a new trial on the pain and suffering and future medical expenses awards. Alternatively (if the new trial request was denied), it asked for a CPLR 4545 collateral source hearing on future medical expenses, arguing that the uninsured plaintiff was eligible for insurance coverage through the ACA, which would offset his future medical expenses. The trial court granted the defendant’s motion only to the extent of directing a new trial unless the plaintiff stipulated to a reduction of the pain and suffering awards to $4 million and $12 million respectively (to which the plaintiff agreed).

The Appellate Division focused on the arguments made by the parties and the trial court. First, it found of no consequence the assertion that the plaintiff could, but did not have to, obtain insurance coverage under the ACA:

It stands to reason that the plaintiff would act in his own economic self-interest by taking the minimally burden- some steps required to obtain available insurance coverage. The defendant should have been afforded the opportunity to offer evidence at a hearing to demonstrate why the plaintiff could be expected to obtain such coverage and whether doing so would, with reasonable certainty, reduce his out-of-pocket costs for future medical expenses.

Id. at *16.

The court maintained that while the penalty for not obtaining coverage was eliminated, “the law nonetheless requires most Americans to comply with its mandate. The plaintiff’s contention that it is improper to expect him to perform an act that he is required to perform under federal law is, therefore, without merit.” Id. at *17. Moreover, plaintiffs are required to mitigate their damages.

The court also addressed the language in CPLR 4545, stating that a court cannot award an offset for future expenses unless it finds “that the plaintiff is legally entitled to the continued receipt of such collateral source, pursuant to a con- tract or otherwise enforceable agreement” (emphasis added). The argument could be made that “a court must limit itself to collateral sources that currently provide benefits to a plaintiff when considering whether such sources will, with reasonable certainty, replace or indemnify ‘certain awarded damages’ in the future.” Id. at *21. The court rejected this argument, asserting that “the ‘continued receipt’ language merely requires the defendant to show that, during some period in the future for which the plaintiff was awarded damages for medical expenses, a collateral source will, with reasonable certainty, replace or indemnify some portion of the awarded damages.” Id. at *22.

Furthermore, the legislative history supported the court’s position. CPLR 4545’s “primary” objective “was to eliminate windfalls and double recoveries for the same loss.” When the statute was amended to include future damages, the Governor’s memorandum talked about sources of compensation “available” to the plaintiff in the future.

The court also pointed to the danger of not permitting a collateral source offset under the circumstances presented here: A plaintiff could put off seeking insurance coverage until after she obtained a judgment, thereby leading to the “windfall” the statute was meant to avoid:

By contrast, construing the statutory language as pro- viding the defendant with the opportunity to prove at a hearing that it should obtain an offset for an insurance policy available pursuant to the ACA “that will, with reasonable certainty, be available to” an uninsured “plaintiff in the future” avoids the type of double recovery that CPLR 4545 serves to guard against (citation omitted).

Id. at *25.