Collateral Estoppel/Res Judicata

Haber v Raso,

130 AD3d 781 [2d Dept., 2015]

CPLR 3217(a) allows a brief window for a plaintiff to withdraw, or voluntarily discontinue, an action, without requiring either a stipulation of any appearing parties or leave of court. Plaintiff needs to serve a notice of discontinuance on all parties before a responsive pleading is served or within twenty days of the service of the complaint. (Again, this actually applies to any party asserting a claim.) The notice of discontinuance is then filed with the clerk.

Where the plaintiff voluntarily discontinues the action by mere notice, 3217 (c) states that the discontinuance is without prejudice, and the plaintiff is free to commence another action when and where he chooses. The only catch is that the plaintiff cannot play this game forever. If the claim has already been interposed and discontinued, by any method, in any state or federal court, a subsequent discontinuance by notice “operates as an adjudication on the merits”.

That seems categorical. Is it really?

In today’s case, plaintiff sued in Supreme Court for rent arrears and damage to real property. The problem was that the plaintiff had sued on the same claim twice before, in Civil Court and in Supreme, and voluntarily discontinued both actions. The second discontinuance, at least, was accomplished by serving and filing a notice of discontinuance.

Defendants moved to dismiss, arguing that the second discontinuance was an adjudication on the merits, and that this third action was barred by res judicata. Supreme Court denied the motion, but the Appellate Division reversed and dismissed. The court noted that “[u]nder the circumstances of this case, where there was no legitimate purpose for discontinuing the second action” the discontinuance operated as an adjudication on the merits. [emphasis supplied]

That phrase raises the question of whether there can be circumstances where a discontinuance by notice is not an adjudication on the merits, despite the categorical language of CPLR 3217 (c). The answer is “yes,” where the discontinuance is for some good cause and not for harassment by means of successive lawsuits.

In Tortorello v Carlin, 162 AD2d 291 [1st Dept., 1990], cited in Haber, plaintiff sued for legal malpractice, twice, and each suit had been discontinued. The underlying dispute was over legal fees. Defendants had represented plaintiff in a matrimonial action, and had been relieved as counsel and awarded a charging lien by the matrimonial court. A hearing had been ordered, in the matrimonial action, to fix the amount of the lien. Plaintiff then sued claiming legal malpractice. The action was discontinued by agreement, since defendants didn’t want to notify their malpractice carrier, and the parties expected to resolve the dispute by negotiation. When no agreement was reached, plaintiff sued a second time. Plaintiff then defaulted on the lien hearing, and judgment was entered in favor of the defendants.

Plaintiff filed a stipulation of discontinuance of the second action, but the only signature on it was that of plaintiff’s counsel.

Plaintiff now sued for malpractice, a third time, and defendants moved to dismiss on the basis of the two earlier discontinuances. Plaintiff’s first argument was that the second discontinuance was by stipulation, not mere notice, making CPLR 3217 (c) inapplicable. A stipulation requires the signature of all parties, however, and so the purported stipulation, served on all parties and filed with the clerk, was held to be a notice of discontinuance. It was not deemed an adjudication on the merits, however, since it was done not for purposes of harassment but for the legitimate purpose of conserving the plaintiff’s resources and achieving an agreement by negotiation.

Note also, by the way, that the discontinuance of a second action by notice is only an adjudication on the merits where the first action was ended by some form of discontinuance. If the first action was ended in some other manner, 3217 (c) does not apply. Where, for example, the first action was not discontinued, but dismissed as abandoned, there is no predicate for deeming the discontinuance by notice of a second action an adjudication on the merits and a third action is not barred (Rodrigues v. Samaras, 117 A.D.3d 1022 [2d Dept., 2014]).

Ziolkowski v Han-Tek, Inc.,

___ AD3d ___, 2015 NY Slip Op 02578 [4th Dept., 2015]

This was a workplace injury case, and the defendant Zynergy Solutions had moved to compel disclosure of certain documents by the plaintiff’s accountant, asserting that they were relevant to the plaintiff’s lost-wages claim. The motion was denied. The accountant was then deposed, and the defendant Han-Tek served a subpoena for the same documents. Plaintiff moved to quash, on the basis that the first order constituted the law of the case. Supreme Court granted the motion to quash.

The Fourth Department reversed. The deposition provided further evidence, making the law of the case doctrine inapplicable. Note, also, the recent determination of the Court of Appeals in Matter of Kapon v Koch, that one seeking to avoid disclosure by a non-party must show that the material or testimony sought is “utterly irrelevant.”

Matter of Dunn,

___ NY3d ___, 2015 NY Slip Op 01556 [February 24, 2015]

The other day I had the privilege of giving a CLE presentation at a joint meeting of the General Practice Section and the Committee on Professional Discipline of the NYS Bar Association. After I finished my “CPLR Update,” I sat down and listened to a panel discussion of “Sanctions in Criminal and Civil Proceedings and the Implications for Ethics and Professional Discipline.”

One of the major points made by the panel was that disciplinary committees can, and frequently do, accept findings of sanctions imposed against lawyers as establishing the fact of ethical violations by way of collateral estoppel. In other words, in such a case the lawyer will not be able to re-litigate the issue of whether there was any misconduct. The only question left will be the form and extent of discipline to be imposed.

I was aware, of course, that a conviction of a crime establishes the underlying facts for the purpose of disciplinary proceedings. That sanctions might be given the same effect was new to me, and put them in a whole new light. The stakes on a motion for sanctions against an attorney are raised exponentially.  There are situations where it might pay not to contest sanctions too strongly, since the procedural apparatus surrounding the sanctions bears directly on the potential for collateral estoppel. As one of the panelists put it, “Money is only money, but an admonition is forever.” (I’m paraphrasing.) Much the same can be said for a motion to disqualify counsel for a conflict of interest.

One of the many cases discussed by the panel was the Third Department decision here, where the  lawyer had been sanctioned by a US Magistrate Judge for making certain “knowingly false” statements. The Magistrate Judge imposed the sanction of admonishment. The Second Circuit dismissed the lawyer’s appeal, finding the Magistrate Judge’s order to be non-final and hence non-reviewable.

The Third Department gave the Magistrate Judge’s findings collateral estoppel effect, precluding relitigation of the facts. Accepting, therefore, that the lawyer had made a false statement “knowingly and in bad faith,” the court imposed the sanction of public censure.

As the panel spoke, the matter was still before the Court of Appeals, and the question was whether the Court would accept that sanctions can ever be given collateral estoppel effect in disciplinary matters. We didn’t have long to wait. The Court’s decision was handed down yesterday.

The Court restated the general proposition that “the doctrine of collateral estoppel has been applied to attorney disciplinary matters in the past and can continue to be applied where the necessary prerequisites have been met — i.e., where the attorney has had a full and fair opportunity to litigate in the prior proceeding.” That is, after all, the basis for giving preclusive effect to criminal convictions.

Here, however, the Court found that the sanctions had been imposed after a motion heard on papers only, with no opportunity to cross-examine the movant’s witnesses or call witnesses for the attorney. The Court found that the proceeding before the Magistrate Judge had been “cursory,” and that the attorney had not had a full and fair opportunity to litigate the issue. The Court rejected the notion that the disciplinary proceeding had to be delayed until the underlying action reaches a conclusion. The continued pendency of the action is no bar to proof of misconduct. Therefore, the order imposing censure was reversed, and the matter remitted to the Appellate Division.

The attorney, of course, is far from out of the woods. The Committee on Professional Standards can still present its own case that discipline is merited. It will not be able to take the collateral estoppel shortcut.