New York and Connecticut Business Litigation Lawyer & Attorney : Rogers & Tartaro Law Firm : Commercial Litigation : Westchester County NY, Fairfield County CT

Recently,Law.com, reported that New York had established statewide guidelines for the qualifications of court-appointed mediators and neutral evaluators ("N.Y. Court Establishes First Statewide Guidelines for Mediators, Neutral Evaluators"). The story was by Joel Stashenko of the New York Law Journal.

Law.com rightly reports that this is a “coming of age” for alternative dispute resolution (ADR).

The story brought to mind a court-appointed mediation session I was involved with for an employment matter that occurred on the same day and just before I attended a seminar on mediation. The mediation session seemed an utter failure and that put me in a negative mindset throughout the seminar.

A few months later, the case settled on terms basically similar to those recommended by the mediator.

One of the points emphasized in that seminar is that mediation (and settlements in general) put the parties back in control. They decide what they will concede or agree to. By contrast, in a litigated resolution, the court decides who will win or lose and to what extent the parties will win or lose.

That was a good lesson to learn. Another good lesson was that the positive effects of mediation may not be immediate. It may take some time for the parties, who have a deep emotional commitment to their positions, to absorb the points made in mediation. After time for thought, and reinforcement by the attorneys on each side, the mediation can be very successful.

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According to the Wikipedia entry, in Greek mythology Scylla and Charybdis were two sea monsters who were on opposite sides of the Strait of Messina between Sicily and Italy. They were located close enough to each other so that they posed an inescapable threat to passing sailors. Avoiding Charybdis meant passing too closely to Scylla and vice versa. Passing between them was one of Odysseus’ adventures in the Odyssey.

In the interest of full disclosure: my origins are from an island in the Strait of Messina. But, I am not related to either Scylla or Charybdis.

I was reminded of the story by a post in the blog of the Capitol Immigration Law Group, LLC concerning issuance of a revised Form I-9, Employment Eligibility Verification ("New I-9 Form Released"). Employers are required to complete and maintain an I-9 on file for all new employees. The CILG post provides useful information about the form and its most recent revision.

The thought came to my mind that employers need to navigate carefully between the monsters of Non-compliance and Over-zealousness.

Immigration is such a hot button topic that I’ll preface further remarks by mentioning that in this blog our perspective is legal and managerial, not political.

Right on the first page of the I-9 instructions is a box warning that it is illegal to discriminate because of national origin or citizenship. The same instruction warns against one of the most common discriminatory practices: employers cannot specify which documents they will accept.  

Employers’ focus, in the interest of compliance and avoidance of wasteful litigation or penalties, should be on learning the I-9 rules and implementing appropriate, non-discriminatory procedures but not going beyond the rules. If in doubt, consult an attorney. 

Image from Wikipedia Commons:Odysseus In Front of Scylla and Charybdis by Johann Heinrich Fussli.

   

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We have previously commented on cases in which the table were turned on a lender in the middle of a foreclosure proceeding or the foreclosure was stopped by a defense such as discrimination, for example, here. But, those were individual cases and limited to New York.

The Wall Street Journal Law Blog, in a a post by Amir Efrati, now reports that judges around the country are scrutinizing foreclosure documents and not allowing the foreclosure to go forward if they find serious discrepancies (“Subprime Legal: Judges Scrutinize mortgage Docs, Deny Foreclosures”).  

Our perspective on this remains the same: probably only a small percentage of borrowers can be helped by any of the defenses or discrepancies reported in these cases. But, good financial management, which should apply to personal finances as well as business, requires that all options be properly reviewed and considered.  An opportunity may be missed if the borrower simply concedes at the outset and lets the foreclosure go through without scrutiny.

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Two mortgage brokers in Pennsylvania might want to consult the Wikipedia entry on Pyrrhus of Epirus after their experience with arbitration and a federal court.

Law.com carries their story in a post by Gina Passarella (“Brokers’ Employment Suit Backfires, Defendant Awarded $1.6 million) of the Legal Intelligerncer. It is an interesting, well written story, about Field v. Gateway Funding, and we won’t go into details since the full story is available by clicking on the title or here.

Essentially, the brokers sued because they claimed the mortgage company infringed on their promised, exclusive sales territory. The case went to arbitration and they won well over $300,000. Problem: the defendant won too, on two claims that: (1) the brokers took advances they did not earn and (2) they provided confidential information when they went to work for a competitor. A federal court confirmed the arbitration award. The net award against the brokers: $1.6 million.  

A few general lessons:

1. The case illustrates the inherent uncertainty of litigation.

2. It is possible that the brokers knew they would be sued so they sued first but, in fact had to litigate. It is also possible the brokers should have had a better understanding or acceptance of their position before commencing litigation. We don’t have the actual back story.  But, it sure looks like if they had quit while ahead, they would have been way ahead.

3. The case illustrates the general nature of arbitration. It is a more efficient, less costly way to resolve disputes and mandatory under some contracts. But, once the arbitrator makes a decision, the courts will generally confirm it. Exceptions are very narrow and hard to get.

Clients will sometimes resist the suggestion to settle or drop a claim. They want a victory. But, a pyrrhic victory is a costly one.   

Image: Pyrrhus of Epirus, from Wikipedia Commons

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Employers concerned about getting workplace litigation under control are including waivers in the employment application process to limit the time within which workers may sue. That is the practice of a growing number of employers ("Waivers Limiting Workers' Time to Sue Draws Fire") according to a report in Law.com, by Tresa Baldas of the National Law Journal.

The Law.com report quotes employment attorneys who represent management as supporting the idea because employers are burdened by lengthy statutes of limitation, litigation is growing and the waivers provide a useful risk management tool. They note that so far some courts have upheld the waivers.

The report notes that attorneys who represent workers are anxious to obtain personnel files when a dispute is brought to them so that they can become aware of what waivers their clients might have signed.

I will preface my remarks with the acknowledgment that I have not seen the language of any actual waivers, it is not clear what causes of action can be waived (discrimination? sexual harassment?) and we have not seen the decisions that upheld the waivers.

However, conceptually the requirement that a prospective employee waive statutes of limitation in the application for employment is probably a bad idea. These waivers would seem to be products of unequal and unfair bargaining positions; there is a question whether the waivers can be knowing waivers if the employment applicant is without counsel; and there is an implication that the waivers seem to give a license for conduct that has public policy considerations. 

A qestion arises as to whether the waivers will reduce litigation or actually produce more litigation for employers.

Large employers may have the resources to work things out so that these waivers are enforceable and can continue to stand up to legal challenge.  Also, large employers can offer other inducements to make up for the recruiting disadvantage that may result. 

Employees should be wary of these waivers. 

Relatively smaller employers should probably wait to see whether and how the law develops to accommodate these waivers.  Their energies are better directed towards positive employment practices which help to avoid litigation and have the added benefit of creating a more productive working environment.     

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Occasionally, from a ruling with a very technical focus we are able to draw a broader lesson.

The Wall Street Journal Law Blog, in a post by Ashby Jones, reported recently that a judge in the U.S. District Court for the Southern District of New York tore into counsel for the plaintiffs in a class-action securities fraud case. The title of the story clearly describes the viewpoint of the judge who took the unusual step of disallowing a class representative: “Judge Jed Rakoff: This Court Will Not Be Party to This Sham.”

The specific issue that set off the fireworks was that plaintiff’s counsel, in a class action, is supposed to produce a class representative with knowledge of the case. The representative chosen by counsel and produced at a deposition in this case, according the LB’s report of the judge’s decision:

. . . testified that he did not know the name of the stock at issue in this case, did not know the name of either individual defendant, did not know whether STA-ILA ever owned Monster stock, did not know if an amended complaint had been filed, did not know whether he had ever seen any complaint in the action, did not know that [an individual] defendant . . . had moved to dismiss the complaint, and did not know that [the organization chosen as class representative] had moved for pre-discovery summary judgment.

Counsel’s task was made a little complicated because they appropriately chose an organization to be class representative and the organization, in turn, chose the specific individual to be deposed.   LB quotes counsel as follows:

The rule requires that the person who is most knowledgeable be produced for deposition, and in this case the client failed to produce someone who was the most knowledgeable. Nothing about this was a sham.

From only a single news story we are reluctant to pile on and criticize counsel about what happened in this particular case.

The story, however, does serve as a sharp reminder of a general lesson: in any litigation, it is crucial to prepare the witness for a deposition.

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An appellate court in California has ruled that an estate plan created by a conservator under a substituted judgment order cannot be contested after the death of the estate owner.

The case is reported by Law.com in an article (“In Appellate First, Attacks on Wills Barred After Estate Owner Dies”) by Pamela A. MacLean of the National Law Journal.

We normally would not comment on a California case but there seem to be some general principles at work here. First, though, we should agree on terminology. While Connecticut uses the same term, “conservator,” in New York, a “guardian” would be involved, more specifically one appointed for an adult under Article 81 of the New York Mental Hygiene Law.

In general terms, someone (conservator or guardian) legally appointed to make decisions for a person who lacked capacity for decision-making created an estate plan. Substituted judgment means, generally, the plan was believed to be what the incapacitated person would have done if that person had not lacked capacity.

Most important in forming our point of view: it was done after a hearing, on notice, with an opportunity for interested parties to be heard and in accordance with a court order.

On these limited facts, one wonders why, as Law.com reports, it would be the first such decision in the nation.  I acknowledge not being able to read the entire case and reacting only to these limited facts. 

But, it seems to me a matter of common sense that if the parties had the opportunity to contest the estate plan before it was approved by the court, the same parties should not be permitted to wait until the death of the incapacitated person and then raise issues that could have been heard and determined in the earlier proceeding.

Will contests or, as is the case here, a challenge to a living trust, can be nasty affairs and can wastefully diminish the estate. There is no reason to give a potential objectant a second opportunity after failing to raise appropriate issues at a first hearing to approve the estate plan. It appears to be common sense and applicable in any state.

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In yet another instance of turning the tables on a foreclosing lender, a New York Supreme Court judge has held that a mortgage loan at a rate of interest that exceeds nine percent, made to a member of a minority group for a property in a minority area, raises a rebuttable presumption of discriminatory practice.  The consequence of the Court’s holding is that the burden of proof shifts to the lender which must prove by a fair preponderance of the evidence that the loan was not discriminatory or face dismissal of its foreclosure proceeding.

The case, M&T Mortgage Corp. v. Foy, 20 Misc.3d 274, 858 N.Y.S.2d 567, 2008 WL 1915125 (Sup. Ct. Kings Co. 2008) was reported in the private blog of the Real Estate Section of the New York State Bar Association.

Just in our last post we discussed a story in Law.com about borrowers suing their lender instead of waiting for the lender to foreclose and two of our earlier posts,here and here, were about cases where the Court treated the foreclosing lender harshly.

In the M&T case, the Court invoked equitable principles in refusing to simply allow the foreclosure proceeding to reach its logical conclusion if the result would be inequitable:

Equity, which abhors unconscionable and unjust results, mandates a shift in the burden of proof to the plaintiff-lender to demonstrate that the loan is not discriminatory. Indeed, our decisional law has long since recognized that a litigant seeking affirmative judicial action in equity ... may not succeed if [the litigant] is asking [for] an inequitable or unconscionable result. (Internal quotation and citations omitted).

The possibility of raising the issue of discrimination, of course, would be relevant only in a case involving a member of a minority group. The cases discussed in earlier posts were not so limited. All the cases under discussion are subject to appeal. The Supreme Court, for our out-of-state readers, is a trial court in New York, not an appellate court.

Most borrowers faced with foreclosure may feel helpless. And, we have to concede that in most cases the borrower may not have any really good options. However, where there is a suggestion that the lender's practices were questionable, the borrower would be well advised to seek legal counsel and consider all the options available. At a minimum, there might be a way to develop leverage for negotiation with the lender.

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Law.com reports that individual borrowers are taking preemptive action against their lenders by suing over deceptive lending practices. The story, “Saying They Were Tricked, Borrowers Fight Back With Lawsuits,“ is by John Pacenti of the Daily Business Review.

We have previously commented on New York cases where the tables were turned on lenders who had started foreclosure proceedings here and here. And, state regulators in various states are suing major lenders over general practices. 

The Law.com report involves cases from around the country that are different from the New York cases because the individual borrowers are not waiting for foreclosure proceedings (and may not be at risk of foreclosure). Nor, are they waiting for state regulators to sue. Instead, the borrowers are starting the lawsuits. 

According to the Law.com report, borrowers complain of practices typical of predatory lending, such as: the lender telling customers interest rates were fixed when they were adjustable, misrepresentations about the length of the loan and teaser rates where rates, in the long-term, are higher. At stake: damages that may include: reimbursement of all mortgage payments, finance charges and interest plus attorneys’ fees and costs.

Some of these suits are apparently supported by organizations formed to help borrowers, such as the Affirmative Defense Group of Margate, Florida mentioned in the Law.com report. 

individual borrowers who are not supported by an organization may have some tough choices to make, drawing on their emotional strength and financial resources, in order to fight back. 

But, with their homes at stake, it may be a necessary choice.

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Acquiring property by adverse possession may be more difficult in the future, at least in New York.

I was alerted to a revision of the New York law of adverse possession, just signed by Governor Paterson, by Sui Generis - - a New York Law Blog in its New York Legal Roundup of July 9, 2008. The Roundup referenced linked to a report in Newsday.com by the Associated Press (Archaic Land Law Revised in New York).   Other news media carried the report.  Norrthcountrygazette.org provided a few background details, indicating this is an example of the legislature trumping the state’s highest court (NY’s Adverse Possession Law Revamped).

We have commented on adverse possession and explained what it is in prior posts here and here.

While Newsday characterizes adverse possession as an “archaic” law, our firm can attest from recent experience that adverse possession is a very live concept in both New York and Connecticut. Research queries turn up many recent cases. 

Media accounts of the new (actually, revised) law are broad-brush. According to the Newsday.com report, the acquisition of a neighbor’s land by adverse possession “will not happen simply because a fence, hedge, shrub, shed or other minimal, nonstructural item is placed across the deeded property line.”

According to the Northcountrygazette.org report, the new law requires that a “claimant have a ‘claim of right’ or ‘reasonable basis for the belief’ that the property is theirs to take by adverse possession.” Northcountrygazette.org also reports that the law is the ultimate product of legislators’ efforts to trump the Court of Appeals and reverse the law created by the case of Walling v. Przybylo,7 N.Y.3d 228, 818 N.Y.S.2d 816 (2006), holding that actual knowledge by the claimant that another person is the owner by deed does not defeat an adverse possession claim.

The news reports do not provide enough details to fully understand the changes. We will comment further when the text of the statutory changes and technical legal commentaries are available. Please “stay tuned.” 

In the meantime, it is still a fact that adverse possession can be “defeated” if property owners walk their property lines, make a note of any encroachments and, with their attorneys, take prompt, appropriate action - - before it’s too late.

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Last week Law.com reported, in an article by Alison Frankel of the American Lawyer (“Wal-Mart Loses $6.5 million Wage-and-Hour Class Action”) that Wal-Mart had lost a non-jury trial on complaints of violation of the Wage-Hour laws that resulted in an award of damages of $6.5 million. Law.com also reported that Wal-Mart was 0 for 3, in that, in the preceding several years it has lost two other trials, these with juries, resulting in damages of $172 million and $78 million. Appeals are pending in the latter two cases and planned in the current case, also according to Law.com. The alleged violations involved, apparently, failure to give employees rest breaks.

Normally, we do not comment on “big business.” What caught our attention was not so much the controversy and apparent hostility between Wal-Mart and the class-action bar. Both have the resources, apparently, to be formidable adversaries to each other. Nor was it Wal-Mart’s apparent willingness to accept the public relations consequences of losing these types of cases.

Rather, what caught our attention were several points about the composition of the damages that may be of interest to the attorneys and managers of businesses with much more modest resources:

• Damages accrued on each occurrence, each time there was no break; thus, the number of employees and the number of days multiplied to millions of alleged violations;
• On the table were compensatory damages, attorneys fees and punitive damages;
• After losing the federal case last week, these same allegations of Wage-Hour violations (whether or not employees were appropriately given breaks) will be the subject of state law litigation with potential for even more damages.

The Law.com article notes that not all the damages that were sought were actually awarded. That highlights the fact that the potential liabilities were even greater.

In short, the case serves as a reminder that violations of the Wage-Hour laws can be extremely serious because damages can escalate very rapidly. Business owners and managers should be aware of the potential for damages and pay careful attention to compliance.

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Conduct that amounts to quid pro quo sexual harassment and its potentially devastating liabilities are readily understood by most of our clients as conduct that is generally not inadvertent. They understand it as a forbidden bargain: employment for a sexual relationship.   

Conduct that creates a “hostile work environment,” however, might require a more active managerial approach to steer clear of liabilities that can be just as devastating.   

With that in mind, I recommend a post by Daniel A. Schwartz in the Connecticut Employment Law Blog discussing a recent Connecticut Appellate Court case in which the Court distinguishes and explains the difference between quid pro quo and “hostile work environment” sexual harassment (“Appellate Court Outlines Differences Again Between Quid Pro Quo and Hostile Work Environment Harassment”). 

The case, Griffin v. Yankee Silversmith, Ltd, is well summarized, discussed and available in full on the CT Employment Law post. I will not attempt to duplicate all that on this post.

I will note parenthetically, however, that the case involved a lawsuit against a business with one owner-shareholder, demonstrating that the issues under discussion are relevant to the broader business community and not only to “big business.”

The case under discussion technically turned on a pleading issue that might be instructive only to lawyers: whether or not quid pro quo harassment was complained of in the actual Complaint. However, the Court’s opinion and the CT Employment Law post will be helpful to both attorneys and managers who could use a better understanding of the distinction between the two types of sexual harassment, and that would be most of us.

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Readers might have noticed that we like commenting on posts in the Wall Street Journal Law Blog. We don’t cover “Big Law” or “Big Business” nor do we usually comment on criminal law, all LB specialties, but some LB posts just stimulate thought and, in this case, memories.

So it is with the recent post by Dan Slater on how Judge Richard Posner, U.S. Court of Appeals, 7^th Circuit, allowed the “Ostrich Instruction” in a criminal jury trial (“Conrad Black’s Sentence Upheld; 7th Circuit OKs Ostrich Instruction”). We’ll pass on commenting on the criminal matter under discussion in the post.

Instead, the concept of an “Ostrich Instruction” reminded me of our firm’s experience with a civil matter, specifically an adverse possession matter that also involved a jury trial. I believe that without being aware at the time, we were confronted with a similar concept which, with apologies to Judge Posner, we will call the “Ostrich Defense.”

An earlier post on this blog generally described the concept of adverse possession ("Losing Your Property Rights Through Inattention". For the sake of brevity, we will now simply say it is a claim that you own part or all of your neighbor’s property after a prescribed period of claimed continuous possession; there is more to it, of course, and for the rest I refer you to the earlier post.

The “Ostrich Instruction,” in a criminal context, is explained by LB in its post with a quote from Judge Posner, who coined the term, as follows:

An “ostrich instruction,” Posner explains, “tells the jury that to suspect that you are committing a crime and then take steps to avoid confirming the suspicion is the equivalent of intending to commit the crime.” Posner also clears up a fallacy: The legend that ostriches bury their head in the sand when frightened, he says, is “pure legend and a canard on a very distinguished bird.”).

The situation involving our derivative “Ostrich Defense” was as follows: In New York, for adverse possession, it is a settled principle that when claiming ownership of a neighbor’s property, the claimant’s knowledge of the actual boundary lines is not all that relevant. However, acknowledgment of the boundary lines would soundly defeat the claim. 

In our adverse possession case, the claimant maintained he could not possibly have acknowledged the boundary lines because he never had knowledge of the boundary lines. This, despite signing numerous documents submitted to municipal authorities that did acknowledge the boundary lines. He claimed to have signed the documents in blank so he never could have had the requisite knowledge. 

There was, of course, cross-examination (by our firm’s other partner Beverley Rogers) and the jury found for our client, the property owner. On appeal, the claimant dropped the adverse possession claim and tried only for a prescriptive easement, where you have right to use but do not own the property. That failed too, the appellate case is 40 AD3d 577, 834 N.Y.S.2d 330 (2d Dep’t 2007).

Well, how do you cross-examine a witness who is relying on the “Ostrich Defense?” Persistently. In this particular case, it was a matter of allowing the claimant to bring out his own inconsistencies.

On the other hand, could the “Ostrich Defense” actually be effective? I have to concede it could be a legitimate and effective defense in a civil matter under the right circumstances.

But, that would be a different case and a different post.

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