www.compton-recycling.com viagra
CPLR Rule 3220 Update: Saul Reversed on Appeal
My prior blog discussed whether CPLR Rule 3220 was becoming a game changer on the recovery of legal fees. The lower court decision in Saul v. Cahan, NY Slip. Op. 50295(u), had held that a party who makes an offer of judgment under CPLR Rule 3220 is entitled to recover the expenses it incurs litigating the case if the claimant is ultimately awarded a judgment that is less favorable than the sum specified in the Rule 3220 offer. Judge Demarest’s opinion was noteworthy in two respects. It found that: (1) the term “expenses” includes legal fees; and (2) Rule 3220 applies not only when the offeror prevails at trial, but also when the “less favorable” judgment is rendered upon a motion to dismiss under CPLR Rule 3211.
The Second Department recently reversed the latter holding, but did not reach the former in a unanimous decision filed on August 30, 2017 (N.Y. Slip. Op. 06390). As to whether the term “expenses” included legal fees, the Court noted generally that the Judge “before whom the case is tried” should determine the “expenses” necessary “for trying the issue of damages”. Because the Court held that Rule 3220 did not apply when the case is disposed of on motion, there was no need to decide whether legal fees could be awarded.
However, the Court’s emphasis on the literal text of Rule 3220, and its belief that it should be construed narrowly given the policy disfavoring the award of counsel fees to a prevailing party, suggests that when confronted with the issue, the Second Department will decline to read “expenses” broadly enough to include counsel fees.
The Court began by noting that “[i]n matters of statutory interpretation, the primary consideration is to discern and give effect to the Legislature’s intention. . . . [T]he text of a provision ‘is the clearest indicator of legislative intent and courts should construe unambiguous language to give effect to its plain meaning.’” (Citations omitted).
The Court held: “The relevant phrase of CPLR 3220 stating that the claimant “shall pay the expenses necessarily incurred by the party against whom the claim is asserted, for trying the issue of damages from the time of the offer”, demonstrates the Legislature’s intent that, where the claimant has not accepted the offer, the commencement of a trial is a condition precedent to imposing liability upon the claimant for the opposing party’s expenses.”
On the public policy issue, the Court wrote: “New York public policy disfavors any award of attorneys’ fees to the prevailing party in a litigation.” . . . Statutes authorizing an award of costs and sanctions are in derogation of common law and, therefore . . . most be strictly construed.’”(Citations omitted).
By requiring only the “commencement of a trial” as a trigger point, the Second Department squared its opinion with the First Department’s earlier decision in Abreu v. Barkin & Associates Realty Inc., 115 A.D.3d 624 (1st Dept 2014), holding that the offeror was entitled to recover its expenses when the case against it was dismissed pursuant to stipulation after a trial was commenced, but before it was concluded (i.e., the issue of damages was not “tried”). Note, however, that Saul remains at odds with the Third Department decision in Morgan v. Kunker, 268 A.D.2d 749, 751 (3d Dept. 2000) (after summary judgment was granted to the defendant sua sponte on appeal, the Third Department remanded the case for determination of the offeror’s expenses).
Case law on Rule 3220 remains sparse. Whether the Rule can become a viable exception to the American rule remains an open question, but the Second Department’s decision suggests that it will not. It is not clear yet whether an appeal to the Court of Appeals will be sought in Saul.
Joe DiBenedetto recently retired from Winston & Strawn LLP, after spending 46 years in its Manhattan office as a capital partner specializing in commercial litigation. He formed JDB Mediation LLC to further develop his mediation and arbitration practice, which is centered in Manhattan and its surrounding counties (including Westchester, Nassau, and Suffolk). Joe DiBenedetto’s experience, training, and other credentials are more fully described at www.JDBMediation.com