author: Jones, J. Smith, J.

text:
    [953 NE2d 773, 929 NYS2d 535]
    In the Matter of Kathleen K., a Child Alleged to be Permanently Neglected. Suffolk County Department of Social Services, Respondent; Steven K., Appellant. (And Two Other Proceedings.)
    Argued May 4, 2011;
    decided June 9, 2011

      POINTS OF COUNSEL

      Feldman and Feldman, Uniondale (Steven A. Feldman and Arza Feldman of counsel), for appellant.
    Appellant should be granted a new termination hearing, before a different Family Court judge, because, notwithstanding a timely and unequivocal prehearing request to represent himself, the Family Court denied his Faretta request without conducting the requisite inquiry. (Faretta v California, 422 US 806; People v Arroyo, 98 NY2d 101; People v McIntyre, 36 NY2d 10; Adams v United States ex rel. McCann, 317 US 269; People v Smith, 68 NY2d 737; Matter of Casey N., 59 AD3d 625; Matter of McGregor v Bacchus, 54 AD3d 678; Matter of Silvestris v Silvestris, 24 AD2d 247; People v Slaughter, 78 NY2d 485; People v Vivenzio, 62 NY2d 775.)

      Christine Malafi, County Attorney, Riverhead (James G. Bernet and Ann K. Kandel of counsel), for respondent.
    I. Appellant did not make either a timely or unequivocal request to represent himself. (Faretta v California, 422 US 806; Matter of Casey N., 59 AD3d 625; Matter of Jetter v Jetter, 43 AD3d 821; Matter of McGregor v Bacchus, 54 AD3d 678; People v McIntyre, 36 NY2d 10; People v Smith, 92 NY2d 516; People v Arroyo, 98 NY2d 101; Matter of Jisun L. v Young Sun P., 75 AD3d 510; People v Mitchell, 42 AD3d 758; People v McClam, 297 AD2d 514.) II. The trial court had sufficient information to make a correct decision on a self-representation application. (People v Arroyo, 98 NY2d 101; People v Providence, 2 NY3d 579; People v Slaughter, 78 NY2d 485; People v Vivenzio, 62 NY2d 775; Matter of Allen v Strough, 301 AD2d 11; Edgewater Constr. Co., Inc. v 81 & 3 of Watertown, Inc., 24 AD3d 1229; Matter of Wesley R., 307 AD2d 360; People v Fernandez, 72 AD3d 303, 15 NY3d 213; People v Smith, 92 NY2d 516.) III. If appellant’s self-representation application was improperly denied, such denial was harmless error. (Chapman v California, 386 US 18; People v Crimmins, 36 NY2d 230; People v Wardlaw, 6 NY3d 556; People v Gillian, 28 AD3d 577, 8 NY3d 85; People v Navarro, 96 AD2d 1126; Matter of Star Leslie W., 63 NY2d 136; Matter of Grace Q., 200 AD2d 894; People v McIntyre, 36 NY2d 10; People v Smith, 92 NY2d 516; People v Slaughter, 78 NY2d 485.) IV. Incompetency argument, raised for first time on appeal, lacks merit. (T. W. Oil v Consolidated Edison Co. of N.Y., 57 NY2d 574; Hunt v Bankers & Shippers Ins. Co. of N.Y., 50 NY2d 938; Gulf Ins. Co. v Kanen, 13 AD3d 579; People v Providence, 2 NY3d 579; People v McIntyre, 36 NY2d 10; Matter of Nereida S., 57 NY2d 636; Faretta v California, 422 US 806; People v Arroyo, 98 NY2d 101; People v Morgan, 87 NY2d 878; Jackson v Indiana, 406 US 715.)

      Judd & Moss, P.C., Ronkonkoma (Francine H. Moss of counsel), Attorney for the Children.
    I. There was no prehearing Faretta request and requests made after the trial commenced were untimely and not unequivocal; as such appellant’s rights were not violated. (People v McIntyre, 36 NY2d 10; Faretta v California, 422 US 806; Chapman v United States, 553 F2d 886; United States v Smith, 780 F2d 810; Savage v Estelle, 924 F2d 1459; United States v Stevens, 83 F3d 60; People v Smith, 68 NY2d 737; People v Gillian, 8 NY3d 85; People v LaValle, 3 NY3d 88; People v Arroyo, 98 NY2d 101.) II. Given that the parental termination proceeding is a civil and not a criminal proceeding, the Second Department’s ruling is not internally inconsistent. (Matter of Vance A., 105 Misc 2d 254; Matter of Daniel Aaron D., 49 NY2d 788; Matter of Carmen G.F., 63 AD2d 651; Matter of Casey J., 251 AD2d 1002; Matter of Justice T., 19 AD3d 1079, 5 NY3d 707; Matter of Barbara Anne B., 51 AD3d 1018; Matter of Shawndalaya II., 31 AD3d 823; Godinez v Moran, 509 US 389.) III. The present status of the children is relevant and this Court must be concerned with their best interests. (Matter of Michael B., 80 NY2d 299; Matter of Danielle Joy K., 60 AD3d 948, 12 NY3d 865; Matter of Antonette Alasha E., 8 AD3d 375; Matter of Shad S. [Amy C.Y.], 67 AD3d 1359.)
   OPINION OF THE COURT

Jones, J.

In June 2007, child neglect proceedings were commenced, pursuant to Family Court Act article 10, by Suffolk County Child Protective Services against appellant Steven K., the father of Kathleen K. and Rachel K. At a hearing on June 5, 2007, testimony was elicited indicating that Steven K. had subjected his children and spouse to mental and physical abuse. Family Court issued a temporary order of protection directing Steven K. to cease all contact with his children except for supervised visitation. At a subsequent trial on September 7, 2007, Family Court found by a preponderance of the evidence that Steven K. had neglected his children. Consequently, in the best interests of the children, the order of protection was made permanent; the children were placed in the foster care of the Suffolk County Department of Social Services (DSS); and Steven K. was ordered to, among other things, undergo a mental health evaluation, attend a parenting skills program, and obtain safe and suitable housing.

At a hearing on January 22, 2009, after learning that Steven K. had failed to comply with the court-ordered conditions, Family Court concluded that the permanency goal for the children should be modified to “free [them] for adoption” and directed DSS to file a petition seeking the termination of Steven K.’s parental rights. The mother of the children voluntarily surrendered her parental rights on December 18, 2008, and DSS filed parental right termination petitions on January 22, 2009 against Steven K. on the ground of permanent neglect (see Social Services Law § 384-b [7]).

On March 31, 2009, prior to the commencement of trial, counsel for Steven K. made an application to the court “to be relieved from this case” on the basis that Steven K. had “refused to work with [counsel] to discuss, to prepare for this trial.” The attorney further argued that it was impossible to work with, or provide effective assistance to Steven K. because of his recalcitrant behavior. Family Court inquired about the application directly with Steven K., but in an exchange with the court, his response did not address the application; instead he spoke about personal medical issues, financial issues, and the possibility of an adjournment of the trial. Family Court denied the application. After DSS had called its first witness, the following colloquy occurred between Family Court and Steven K.:

“the court: And you are not in a position to object.
You have a lawyer. You cannot object.
“[steven k.]: I asked for the lady to be terminated.
“the court: You’re ready to proceed on your own? “[steven k.]: If I have to.
“the court: You can’t proceed on your own. You don’t know the law.
“[steven k.]: We went through this already.
“the court: Sorry.
“[steven k.]: So you’re refusing me an assignment of counsel.
“the court: I gave you counsel.
“[steven k.]: I turned it down.”

Additionally, on April 2, 2009, counsel for Steven K. stated that she was renewing her application to be relieved and his application to represent himself. Family Court again denied the motion.

Following the completion of trial, Family Court terminated Steven K.’s parental rights due to his persistent failure to comply with court-mandated conditions and the lack of evidence evincing efforts to adequately provide for his family. The Appellate Division unanimously upheld the disposition, holding that Steven K.’s applications to represent himself were not unequivocal and timely (71 AD3d 1146, 1147 [2d Dept 2010]). This Court granted leave to appeal (15 NY3d 702 [2010]), and we now affirm on the same basis.

It is well settled that a criminal defendant’s constitutional right to counsel concomitantly includes the right to refuse appointed counsel (see Faretta v California, 422 US 806 [1975]; People v McIntyre, 36 NY2d 10 [1974]; US Const Amend VI; NY Const, art I, § 6). In the seminal case Faretta, the United States Supreme Court explained that the right to defend oneself in a criminal proceeding is a personal right, i.e., it is defendant’s right, not counsel’s, to be informed of the charges and to confront the witnesses against him. Consequently, a criminal defendant can decline representation, but self-representation is not an unfettered right. The trial court must ensure that the defendant knowingly, intelligently, and voluntarily waives counsel before permitting the individual to forgo counsel and proceed pro se (id. at 835 [the court must ensure that “(defendant) knows what he is doing and his choice is made with eyes open”]). That a defendant lacks legal skill or knowledge is not a preclusive bar to self-representation so long as the defendant voluntarily waives the right to counsel (id. at 836 [“(T)echnical legal knowledge, as such, was not relevant to an assessment of his knowing exercise of the right to defend himself’]).

New York similarly guarantees a constitutional right of self-representation to criminal defendants. This Court has recognized that “even in cases where the accused is harming himself by insisting on conducting his own defense, respect for individual autonomy requires that he be allowed to go to jail under his own banner if he so desires and if he makes the choice with eyes open” (McIntyre, 36 NY2d at 14 [internal quotation marks omitted]).

Accordingly, this Court has enumerated certain essential requirements that must be satisfied for a criminal defendant to effectively represent himself:

“A defendant in a criminal case may invoke the right to defend pro se provided: (1) the request is unequivocal and timely asserted, (2) there has been a knowing and intelligent waiver of the right to counsel, and (3) the defendant has not engaged in conduct which would prevent the fair and orderly exposition of the issues” (id. at 17).

If a timely and unequivocal request has been asserted, then the trial court is obligated to conduct a “searching inquiry” to ensure that the defendant’s waiver is knowing, intelligent, and voluntary (see People v Slaughter, 78 NY2d 485 [1991]; People v Vivenzio, 62 NY2d 775, 776 [1984]). A waiver is voluntarily made when the trial court advises the defendant and can be certain that the “dangers and disadvantages of giving up the fundamental right to counsel have been impressed upon the defendant” (Slaughter at 491 [internal quotation marks omitted]). A “searching inquiry” does not have to be made in a formulaic manner (see People v Smith, 92 NY2d 516, 520 [1998]), although it is better practice to ask the defendant about his “age, education, occupation, previous exposure to legal procedures and other relevant factors bearing on a competent, intelligent, voluntary waiver” (People v Arroyo, 98 NY2d 101, 104 [2002]).

Assuming, without deciding, that a parent in a termination of parental rights proceeding has a Faretta-type right of self-representation, in our view, the record does not facially demonstrate unequivocal and timely applications for self-representation that would have triggered a “searching inquiry.” Steven K. argues that there are two junctures within the record where he invoked the right to represent himself. The first occurred on March 31, 2009, prior to the commencement of trial; and subsequently on April 2, 2009, the second day of trial. With respect to the first application, although its timeliness is not at issue because it was made prior to trial, on this record, the request was not unequivocal. Contrary to Steven K.’s contention, rather than clearly articulating that he sought to represent himself, his counsel stated that she wanted “to be relieved from this case” without advising the court that Steven K. wished to proceed pro se (see People v Rainey, 240 AD2d 682, 683 [2d Dept 1997]; People v Jones, 187 AD2d 750 [3d Dept 1992]). When Family Court sought further explanation from Steven K. himself, he proffered nonresponsive answers that did not provide any clarity as to the basis of the application. The record further belies Steven K.’s position that he unequivocally sought to represent himself when he later informed the court “[t]hat’s why I want a different counsel.”

While Steven K. correctly argues that a request for self-representation does not require the recitation of “[a] talismanic formula” to alert a trial court (Dorman v Wainwright, 798 F2d 1358, 1366 [11th Cir 1986]), the application must reflect a purposeful decision to relinquish the benefit of counsel and proceed singularly. In People v Gillian (8 NY3d 85 [2006]), we held that a criminal defendant’s request for self-representation which was made in the alternative to an underlying request for substitution of counsel was not an unequivocal request, especially where it was used as leverage to compel dismissal of assigned counsel. There, the defendant initially sought to substitute his assigned counsel on the grounds of conflict of interest and difference in strategy. When that application was denied, the defendant moved to represent himself. The trial court denied the motion and the defendant again sought reassignment of counsel, or in the alternative, self-representation. The trial court twice substituted counsel, but when the defendant was assigned his third attorney, he did not renew any applications. This Court concluded that in substance the defendant’s applications were for substitution of counsel because he was dissatisfied with his representation, and warned that a request for self-representation must be clear, unconditional, and unequivocal “[i]n order to ensure that convicted defendants do not pervert the system by subsequently claiming a denial of their pro se right” (id. at 88 [internal quotations marks omitted]). Like Gillian, this record does not reflect an affirmative desire for self-representation. It can be reasonably inferred that the gravamen of Steven K.’s complaint stemmed from dissatisfaction with counsel, and the tenor of the initial application indicates that self-representation was reserved as a final, conditional resort (see People v LaValle, 3 NY3d 88, 106 [2004]).

The second request, made after the commencement of trial, is clearly untimely. An application is “timely interposed when it is asserted before the trial commences” (McIntyre, 36 NY2d at 17; see also People v Jenkins, 45 AD3d 864, 865 [2d Dept 2007]; People v Spohn, 43 AD2d 843 [2d Dept 1974]). If the request is made thereafter, the “right is severely constricted” and the trial court must exercise its sound discretion and grant the request only under compelling circumstances (McIntyre, 36 NY2d at 17). Here, counsel reiterated her earlier application and proffered no compelling circumstances justifying the need to grant the application. In addition, there is nothing in the record to indicate that a compelling factor had arisen during the period between the first request on March 31, 2009 (the first day of trial) and the ensuing application on April 2, 2009 (the second day of trial) to warrant particular consideration by the court.

Accordingly, the order of the Appellate Division should be affirmed, without costs.

Smith, J.

(concurring). Here, as in People v Gillian (8 NY3d 85 [2006]), the majority finds equivocation where I cannot. Appellant did answer, “If I have to,” to the trial court’s question: “You’re ready to proceed on your own?” But when he said that, it was clear, beyond doubt, that he did have to unless he was to continue with his court-appointed lawyer; and it was equally clear that he found that lawyer unacceptable. The whole point of the right of self-representation recognized in Faretta v California (422 US 806 [1975]) is that a defendant in a criminal case is entitled to choose, however foolishly and self-destructively, to represent himself rather than to take a lawyer forced on him by the state. Thus if appellant here had a Faretta right, his invocation of it was not equivocal.

The trial court’s response to appellant’s application was: “You can’t proceed on your own. You don’t know the law.” Surely no one would argue — and the majority here does not suggest — that this would be an appropriate response to a defendant’s request to go pro se in a criminal case. Criminal defendants, no matter how little law they know, are entitled to blunder through on their own if they want to, so long as they are competent to stand trial (Godinez v Moran, 509 US 389 [1993]).

I therefore think that this case requires us to reach the question the majority avoids deciding: Does the right protected by Farreta and Godinez apply in a Family Court proceeding for the termination of parental rights? I would answer that question no. The difference between a criminal case and a case like this is glaring. A criminal defendant who chooses to go without a lawyer will ordinarily harm no one but himself, but a parent who makes that choice in a parental rights proceeding can harm his children. Weighty as appellant’s own interest in the outcome of this proceeding is, the interests of his two daughters are no less so. It was essential for their protection that both sides of the case be competently presented; otherwise there would be an unacceptable danger that parental rights would be terminated when they should not be.

Thus I conclude that the Family Court judge in this case was entirely right — just as right as a criminal court judge similarly situated would have been wrong — to tell appellant: “You can’t proceed on your own. You don’t know the law.” For that reason, I concur in the result reached by the majority.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read and Pigott concur with Judge Jones; Judge Smith concurs in result in a separate opinion.

Order affirmed, without costs.

      . Family Court’s finding of neglect in 2007 was affirmed by the Appellate Division (see Matter of Kathleen K., 66 AD3d 683 [2d Dept 2009]).

      . The children were subsequently adopted on March 12, 2010.


source: Caselaw Access Project

author: Smith, J.

license: Public Domain

text:
    [953 NE2d 790, 929 NYS2d 552]
    Farrah Donald, Appellant, v State of New York, Respondent. Shakira Eanes, Appellant, v State of New York, Respondent. Jonathan Orellanes, Appellant, v State of New York, Respondent. Ismael Ortiz, Also Known as Jose Rodriguez, Appellant, v State of New York, Respondent.
    Argued May 31, 2011;
    decided June 23, 2011

      POINTS OF COUNSEL

      McKain Law Firm, P.C., Rochester (Kevin K. McKain and Andrew D. Fiske of counsel), for appellant in the first above-entitled action.
    I. The Appellate Division decision should be reversed because the Department of Correctional Services lacks jurisdiction to impose postrelease supervision onto a criminal sentence without the express consent of the sentencing court. (Davis v City of Syracuse, 66 NY2d 840; Earley v Murray, 451 F3d 71; Hill v United States ex rel. Wampler, 298 US 460; Collins v State of New York, 69 AD3d 46.) II. Even if Collins v State of New York (69 AD3d 46 [2009]) is upheld, the Appellate Division decision should be reversed because the case at bar is factually and legally distinguishable. (Matter of Quinones v New York State Dept. of Correctional Servs., 46 AD3d 1268; People ex rel. Burch v Goord, 48 AD3d 1306.)

      Law Office of Robert Dembia, PC, New York City (Robert Dembia of counsel), for appellant in the second, third and fourth above-entitled actions.

      Eric T. Schneiderman, Attorney General, Albany (Andrea Oser, Barbara D. Underwood and Zainab A. Chaudhry of counsel), for respondent in the first above-entitled action.
    I. Common-law privilege protects the State of New York from liability for the actions of state officials who revoked claimant’s postrelease supervision and received him in custody. (Martinez v City of Schenectady, 97 NY2d 78; Broughton v State of New York, 37 NY2d 451; Davis v City of Syracuse, 66 NY2d 840; Harty v State of New York, 29 AD2d 243, 27 NY2d 698; Jones v State of New York, 31 AD2d 992; Boose v City of Rochester, 71 AD2d 59; Nastasi v State of New York, 275 App Div 524, 300 NY 473; Nuernberger v State of New York, 41 NY2d 111; Nazario v State of New York, 75 AD3d 715; People ex rel. Spinks v Harris, 53 NY2d 784.) II. The State of New York is not liable for recording claimant’s mandatory period of postrelease supervision without confirming oral pronouncement by the sentencing court. (Arteaga v State of New York, 72 NY2d 212; Newiadony v State of New York, 276 App Div 59; Lauer v City of New York, 95 NY2d 95; Tango v Tulevech, 61 NY2d 34; McLean v City of New York, 12 NY3d 194; Haddock v City of New York, 75 NY2d 478; Tarter v State of New York, 68 NY2d 511; Semkus v State of New York, 272 AD2d 74, 95 NY2d 761; Eiseman v State of New York, 70 NY2d 175; Barrett v State of New York, 220 NY 423.) III. The State of New York is not liable for continuing to hold claimant in the wake of Earley v Murray (451 F3d 71 [2006]), Matter of Garner v New York State Dept. of Correctional Servs. (10 NY3d 358 [2008]) and People v Sparber (10 NY3d 457 [2008]) until individualized adjudication by the courts. (People v Kin Kan, 78 NY2d 54; Scott v Fischer, 616 F3d 100; Ruffins v Department of Correctional Servs., 701 F Supp 2d 385; Davis v State of New York, 257 AD2d 112; Waterman v State of New York, 207 Misc 773, 1 AD2d 235, 2 NY2d 803; Brown v State of New York, 10 Misc 2d 833, 6 AD2d 1022; Todzia v State of New York, 53 Misc 2d 200; State of New York v Myers, 22 Misc 3d 809; People ex rel. Spinks v Harris, 53 NY2d 784; People v Lingle, 16 NY3d 621.)

      Eric T. Schneiderman, Attorney General, Albany (Andrea Oser, Barbara D. Underwood and Zainab A. Chaudhry of counsel), for respondent in the second, third and fourth above-entitled actions.

      Joel Berger, New York City, for Sidney Burch and others, amici curiæ.
    Individuals sentenced to postrelease supervision (PRS) (Penal Law § 70.45) by the Department of Correctional Services rather than by the sentencing judge, and subsequently imprisoned by the Division of Parole for technical violations of PRS after Earley v Murray (451 F3d 71 [2d Cir 2006]), are entitled to damages for the period during which they were illegally incarcerated. (Hill v United States ex rel. Wampler, 298 US 460; Burhlre v Earley, 551 US 1159; Brown v Board of Education, 347 US 483; People v Wright, 56 NY2d 613.)

      Legal Aid Society, Criminal Appeals Bureau and Parole Revocation Defense Unit, New York City (Elon Harpaz of counsel), amicus curiæ.
    The State of New York should pay damages for wrongful imprisonment where it mounted a massive campaign of resistance to the Second Circuit’s decision in Earley v Murray (451 F3d 71 [2d Cir 2006]) in an attempt to justify the continued unlawful incarceration of individuals for violating a term of administratively imposed postrelease supervision. (People v Kin Kan, 78 NY2d 54; People v Catu, 4 NY3d 242; People v Martinez, 40 AD3d 1012; People v Wilson, 37 AD3d 855; People v Boyd, 12 NY3d 390; People v Boyce, 12 AD3d 728; People v White, 296 AD2d 867; People v Cephus, 13 Misc 3d 1211[A], 2006 NY Slip Op 51779[U]; People v Ryan, 13 Misc 3d 451.)
   OPINION OF THE COURT

Smith, J.

Claimants in these four cases were convicted of crimes for which they received determinate sentences. A statute required that such a sentence include a period of postrelease supervision (PRS), but in each claimant’s case the sentencing judge failed to pronounce a PRS term. Claimants were nevertheless subjected to PRS, and in three of the four cases were imprisoned for PRS violations. They now seek damages from the State of New York, asserting that they were wrongly made to undergo supervision and confinement. We hold that all of their claims are without merit.

I

Each claimant was convicted of a felony: Farrah Donald of weapon possession, Shakira Eanes of attempted robbery, Jonathan Orellanes of robbery and Ismael Ortiz of assault. Each received a determinate prison term. At the time of their sentences, Penal Law § 70.45 (1) said: “Each determinate sentence also includes, as a part thereof, an additional period of post-release supervision.” In claimants’ cases, however, as in many others, the sentencing judge pronounced only a term of imprisonment, not a term of PRS, a practice we held to be improper in People v Sparber (10 NY3d 457 [2008]) and Matter of Garner v New York State Dept. of Correctional Servs. (10 NY3d 358 [2008]). Orellanes’s case is like that of the Sparber defendants, in that the commitment sheet issued by the sentencing court did include a PRS term, but the other claimants are in the position of the Garner petitioner: the commitment sheets, like the sentences orally pronounced by the judge, omitted all mention of PRS.

The Department of Correctional Services (DOCS) entered a PRS term for each claimant on its records. Each claimant, upon being released, was informed that he or she was subject to PRS, was given a list of conditions to comply with, and was subjected to supervision by the Division of Parole. All claimants except Ortiz violated one or more of their PRS conditions, and were incarcerated again as a result.

Each claimant filed a claim against the State in the Court of Claims, and in each case the State moved to dismiss. In Donald, the Court of Claims denied the motion to dismiss and granted Donald partial summary judgment (Donald v State of New York, 24 Misc 3d 329 [Ct Cl 2009]); the Court of Claims dismissed the other three cases. The Appellate Division reversed in Donald (Donald v State of New York, 73 AD3d 1465 [4th Dept 2010]) and affirmed in the other cases (Eanes v State of New York, 78 AD3d 1297 [3d Dept 2010]; Orellanes v State of New York, 78 AD3d 1308 [3d Dept 2010]; Ortiz v State of New York, 78 AD3d 1314 [3d Dept 2010]), thus dismissing all claimants’ claims. We granted claimants leave to appeal, and now affirm.

II

All claimants assert, in substance, that they are entitled to damages from the State because DOCS, acting without court authority, administratively added PRS to their prison terms. On the face of the claims, it is clear that none of the claimants may recover.

Orellanes is the easiest case to dispose of, because in that case DOCS did not err; in entering a PRS term on Orellanes’s record, DOCS was merely carrying out the mandate of the sentencing court, as recorded by the court clerk in a commitment sheet. The only error in that case was by the sentencing judge, who failed to pronounce the PRS term orally. Any claim against the State based on the judge’s error would be barred by judicial immunity (Mosher-Simons v County of Allegany, 99 NY2d 214 [2002]).

The claims of Donald, Eanes and Ortiz require only a bit more discussion. Each of them sues the State for false imprisonment (also known as wrongful confinement), but none has pleaded the essential elements of that tort. Ortiz has not even alleged, and apparently cannot allege, that DOCS’s error caused him to be imprisoned or confined. Donald and Eanes clear that hurdle, but fail to allege another element: that their confinement was not privileged (see Broughton v State of New York, 37 NY2d 451, 456 [1975]; Collins v State of New York, 69 AD3d 46 [4th Dept 2009]). “A detention, otherwise unlawful, is privileged where the confinement was by arrest under a valid process issued by a court having jurisdiction” (Davis v City of Syracuse, 66 NY2d 840, 842 [1985] [internal quotation marks and citations omitted]). Neither Donald nor Eanes alleges any defect in the process by which he or she was arrested for violating PRS, or in the jurisdiction of the court that issued that process.

The claims of Donald, Eanes and Ortiz may also be read as asserting that the State is liable for DOCS’s alleged negligence in subjecting these claimants to unauthorized PRS terms. To establish such liability, claimants would have to show what every tort plaintiff must show: a duty owed to the claimant, a breach of that duty, and injury resulting from the breach. Issues exist as to each of these three elements, but we do not reach any of those issues, because the negligence claims are barred for another reason: the State is immune from liability for the discretionary acts of its officials (Tango v Tulevech, 61 NY2d 34, 40 [1983] [“when official action involves the exercise of discretion, the officer is not liable for the injurious consequences of that action even if resulting from negligence or malice”]; Lauer v City of New York, 95 NY2d 95, 99 [2000] [“A public employee’s discretionary acts . . . may not result in the municipality’s liability even when the conduct is negligent”]; McLean v City of New York, 12 NY3d 194, 203 [2009] [“Government action, if discretionary, may not be a basis for liability”]).

Where the issue is governmental immunity, an action is considered “discretionary” if it involves “the exercise of reasoned judgment” (Lauer, 95 NY2d at 99). DOCS’s actions in recording PRS terms as part of claimants’ sentences were discretionary in that sense. In each of these cases, DOCS was presented with a prisoner sentenced to a determinate prison term, for whom PRS was mandatory under state law. DOCS made the “reasoned judgment” that it should interpret their sentences as including PRS, though the sentences rendered by the courts did not mention it. We held in Garner that that judgment was mistaken, but it clearly was just that — a mistake in judgment — not a ministerial error, like mistranscribing an entry or confusing the files of two different prisoners.

Making judgments as to the scope of its own authority in interpreting the directions it has received from the court system is a normal and legitimate part of DOCS’s function. We implicitly recognized this in Garner, where we observed that administratively adding a PRS term was an act “in excess of DOCS’s jurisdiction” (10 NY3d at 362 [emphasis added]). We did not suggest that DOCS was without any jurisdiction to make judgments of this kind. Because DOCS was exercising — albeit mistakenly — the discretion given it by law, its acts cannot be a basis for state liability.

Accordingly, the order of the Appellate Division in each case should be affirmed, with costs.

Chief Judge Lippman and Judges Ciparick, Grappeo, Read, Pigott and Jones concur.

In Donald v State of New York-. Order affirmed, with costs.

In Eanes v State of New York, Orellanes v State of New York and Ortiz v State of New York: On review of submissions pursuant to section 500.11 of the Rules of the Court of Appeals (22 NYCRR 500.11), order affirmed, with costs.


author:
Read, J.
      Smith, J.

text:
    [955 NE2d 329, 931 NYS2d 22]
    The RGH Liquidating Trust, on Behalf of Reliance Group Holdings, Inc., and Others, Appellant, v Deloitte & Touche LLP et al., Respondents.
    Argued April 27, 2011;
    decided June 23, 2011

      POINTS OF COUNSEL

      Gage Spencer & Fleming LLP, New York City (William B. Fleming and G. Robert Gage, Jr., of counsel), for appellant.
    I. The RGH Liquidating Trust should be treated as “one person” under the Securities Litigation Uniform Standards Act’s single-entity exemption. (Matter of Lower Manhattan Loft Tenants v New York City Loft Bd., 66 NY2d 298; Scaringi v Broome Realty Corp., 154 Misc 2d 786; State of Maryland v Antonelli Creditors’ Liquidating Trust, 123 F3d 777; In re Boston Regional Med. Ctr., Inc., 410 F3d 100; In re Refco, Inc. Sec. Litig., 628 F Supp 2d 432; LaSala v Bordier et Cie, 519 F3d 121; Smith v Arthur Andersen LLP, 421 F3d 989; Cape Ann Invs. LLC v Lepone, 296 F Supp 2d 4.) II. The First Department’s dismissal of the claims of the five bondholders specifically identified in the amended complaint was improper. (Smith v Arthur Andersen LLP, 421 F3d 989.)

      Kramer Levin Naftalis & Frankel LLP, New York City (Michael J. Dell and Adina C. Levine of counsel), for respondents.
    I. The First Department’s unanimous ruling that The RGH Liquidating Trust’s claims on behalf of the bondholders are precluded by Securities Litigation Uniform Standards Act should be affirmed. (LaSala v Bordier et Cie, 519 F3d 121; Golub v Hilb, Rogal & Hobbs Co., 379 F Supp 2d 639; Kircher v Putnam Funds Trust, 547 US 633; Editorial Photocolor Archives v Granger Collection, 61 NY2d 517; INS v National Center for Immigrants’ Rights, Inc., 502 US 183; People v Realmato, 294 NY 45; Cape Ann Invs. LLC v Lepone, 296 F Supp 2d 4; Smith v Arthur Andersen LLP, 421 F3d 989; Flanagan v Prudential-Bache Sec., 67 NY2d 500; United States v Banks, 514 F3d 959.) II. Alternatively, the Appellate Division’s decision should be affirmed on other grounds because The RGH Liquidating Trust has not stated bondholder claims. (Matter of Chasm Hydro, Inc. v New York State Dept. of Envtl. Conservation, 14 NY3d 27; Matter of OnBank & Trust Co., 90 NY2d 725; Public Serv. Mut. Ins. Co. v Goldfarb, 11 AD2d 521; Reno v Bull, 226 NY 546; Megaris Furs v Gimbel Bros., 172 AD2d 209; Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553; Greschler v Greschler, 51 NY2d 368; Parks v Leahey & Johnson, 81 NY2d 161; Waggoner v Caruso, 68 AD3d 1; Linden v Moskowitz, 294 AD2d 114.)
   OPINION OF THE COURT

Read, J.

We hold that The RGH Liquidating Trust (the Trust or the Liquidating Trust), established under the bankruptcy reorganization plan of Reliance Group Holdings, Inc. (RGH) as the debtor’s successor, is “one person” within the meaning of the single-entity exemption in the Securities Litigation Uniform Standards Act of 1998 (Pub L 105-353, 112 US Stat 3227 [SLUSA]; see 15 USC § 77p [f] [2] [C]; § 78bb [f] [5] [D]). As a result, SLUSA does not preclude Supreme Court from adjudicating the state common-law fraud claims that plaintiff Trust has brought against defendants Deloitte & Touche LLI) an accounting and consulting firm, and Jan A. Lommele, a principal of the firm, for the benefit of RGH’s and Reliance Financial Services Corporation’s (RFS) bondholders.

I.

RGH, a publicly held company, owned 100% of the stock of RFS, which, in turn, owned 100% of the stock of Reliance Insurance Company (RIC). RIC generated upwards of 90% of the income of RGH, whose principal business was its ownership, through RFS, of RIC and its property and casualty insurance subsidiaries. Deloitte was the independent outside accountant and auditor for RGH, RFS and RIC and its subsidiaries, supplying annual audits of their financial statements; Lommele served as RIC’s appointed actuary, responsible for assessing the adequacy of the company’s loss reserves.

By the end of 1999, the Reliance companies, their financial condition deteriorating, were edging toward insolvency. RGH suffered an operating loss of $318.3 million in 1999, and, in February 2000, announced that it was suspending its quarterly dividend and extending the maturity of its bank loans. Then in May, RGH reported a $36.5 million operating loss (before gains on sales of investments) for the first quarter of 2000. Sometime in June 2000, RIC stopped underwriting property and casualty insurance. In July, a deal for a major holding company to acquire RGH collapsed, and Moody’s Investors Service downgraded its ratings for the company. By December 5, 2000, RGH’s shares had fallen 99.9% during the year, closing at 39 cents. On December 6, 2000, the New York Stock Exchange suspended trading of RGH’s securities.

On June 22, 2000, certain RGH common stockholders filed a class action complaint (the first of several) in the United States District Court for the Southern District of New York against RGH and three former directors and officers of RGH and RIC. These stockholder plaintiffs alleged that RGH and the individual defendants violated federal securities laws by making false and misleading statements regarding RGH’s financial condition, thereby artificially inflating the company’s stock price. Subsequently, bondholders launched similar federal securities class actions against RGH and individual directors and officers in the same court. All the cases were consolidated in October 2000. On July 16, 2001, an amended class action complaint was filed on behalf of stockholders who purchased common stock during the period from February 8, 1999 through December 6, 2000, and bondholders who purchased 9% senior notes due November 15, 2000 (hereafter, the senior bondholders) or 9.75% senior subordinated debentures due November 15, 2003 (hereafter, the subordinated bondholders) (collectively, the bondholders) during that same time period.

On May 29, 2001, the Commonwealth Court of Pennsylvania placed RIC in rehabilitation, and named the Pennsylvania Insurance Commissioner as RIC’s rehabilitator. RIC entered liquidation on October 3, 2001, and the Commissioner was appointed liquidator. Meanwhile, on June 12, 2001, RGH and RFS filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York, seeking chapter 11 bankruptcy protection. For administrative and procedural purposes, the court consolidated the two bankruptcies.

On April 22, 2005, RFS’s plan of reorganization, approved by the bankruptcy court, went into effect and RFS emerged from bankruptcy as Reorganized RFS Corporation. Under RFS’s bankruptcy plan, its litigation claims and those of its general unsecured creditors were assigned to RGH. The bankruptcy court subsequently confirmed RGH’s bankruptcy plan — the First Amended Plan of Reorganization of Reliance Group Holdings, Inc. (the Plan), effective December 1, 2005 — which created the Trust as successor to RGH pursuant to a Liquidating Trust Agreement and Declaration of Trust (the Trust Agreement). The Plan transferred the bankruptcy estate’s assets, which included the litigation claims of RGH, RFS and their respective general unsecured creditors who did not opt out of the Plan, to the Trust.

Specifically, the Plan stated that the Trust was established for the “primary purpose” of “the liquidation of the assets transferred to it.” Concomitantly, the Trust Agreement specified that the Trust’s “primary purpose” was to “receive the Trust Property and assume the Assumed Liabilities, and thereafter liquidate and distribute the Trust Property for the benefit of the Trust Beneficiaries [i.e., bankruptcy estate creditors].” The Plan defined “Trust Property” as “the Assets that vest in the Liquidating Trust on the [Plan’s] Effective Date plus any income earned thereon and all proceeds thereof minus all costs and expenses of and paid by the Liquidating Trust and Distributions [i.e., transfers of cash or other property to those whose claims were allowed]”; and “Assets” as “any and all assets of the Estate as of the [Plan’s] Effective Date, whether tangible or intangible, liquidated or unliquidated.”

In furtherance of the Trust’s primary purpose, the Plan authorized it to

“issue the beneficial interests in the Liquidating Trust to Trust Beneficiaries [i.e., bankruptcy estate creditors], in accordance with the terms hereof, preserve, protect and maximize the value of the Trust Property, evaluate litigation claims, sell or otherwise liquidate the Trust Property as promptly and efficiently as is reasonably possible, and distribute all income and proceeds from the Trust Property in accordance with the terms of the Plan and the Liquidating Trust Agreement.”

Under the Trust Agreement, the Trust was permitted to exercise any powers consistent with its powers under the Plan and the Trust Agreement, including investing the Trust’s assets; making distributions; paying taxes and any other obligations owed or incurred by the Trust; creating and administering reserves in accordance with the Plan; filing tax returns; and acting in accordance with the various court-approved settlements forming the Plan’s basis. The Plan also clarified that the Trust was empowered to object to and/or otherwise resolve any disputed claims against RGH’s bankruptcy estate.

On January 6, 2006, the Trust filed an action in Supreme Court against Deloitte and Lommele on behalf of RGH, RES and their general unsecured creditors, alleging causes of action for actuarial fraud, accounting and auditing fraud, breach of contract and fraudulent conveyance. Defendants moved to dismiss on various grounds, and Supreme Court granted the motion on September 27, 2006; however, as for the creditors’ fraud claims, Supreme Court granted the Trust leave to serve and file an amended complaint to plead “reliance and the consequence of that reliance with more specificity” (13 Misc 3d 1219[A], 2006 NY Slip Op 51908[U], *6 [Sup Ct, NY County 2006]). The Trust appealed (except as to the creditors’ fraud claims), and the Appellate Division affirmed (47 AD3d 516 [1st Dept 2008]).

On November 2, 2006, the Trust filed an amended complaint, which alleged two causes of action: one for actuarial fraud against Deloitte and Lommele, and one for accounting and auditing fraud against Deloitte. The Trust asserted these claims for the benefit of unidentified general unsecured creditors; the senior and subordinated bondholders; 15 bank lenders; former employees; and the Pension Benefit Guaranty Corporation (PBGC), a wholly owned United States government corporation and agency of the United States. The Trust committed to distribute any monies recovered on the bondholders’ claims on a pro rata basis to a “participant list” maintained by a depository trust company, as well as to those who “have identified [themselves] as bondholders by filing proofs of claims with the Bankruptcy Court.” Deloitte again moved to dismiss, now arguing that SLUSA preempted the lawsuit. The Trust countered that it qualified for the so-called single-entity exemption that SLUSA affords “a corporation, investment company, pension plan, partnership, or other entity . . . not established for the purpose of participating in the action” (see 15 USC § 77p [f] [2] [C]; § 78bb [f] [5] [D]).

In a decision dated November 7, 2007, Supreme Court held that the Trust was a single entity within the meaning of SLUSA because its primary purpose was broader than the pursuit of the state law fraud claims. Accordingly, the court granted the motion only as to the Trust’s claims on behalf of the unidentified general unsecured creditors, whose reliance was not specifically pleaded (17 Misc 3d 1128[A], 2007 NY Slip Op 52181[U] [Sup Ct, NY County 2007]). Deloitte appealed; the Trust did not cross-appeal.

On December 8, 2009, the Appellate Division modified Supreme Court’s order by granting the motion to dismiss the Trust’s claims for the benefit of the bondholders (71 AD3d 198 [1st Dept 2009]). The court took the position that the Trust was not exempt from SLUSA as a single entity because “the bondholders’ claims against Deloitte [were] not being asserted on behalf of the Reliance bankruptcy estate; the claims originally belonged to the bondholders, not Reliance” (id. at 214). The Appellate Division agreed, however, that Supreme Court properly declined to dismiss the Trust’s claims for the benefit of the other groups of creditors—i.e., the 15 banks, two former employees and the PBGC (71 AD3d at 215). On July 8, 2010, the Appellate Division certified the following question to us: “Was the order of the Supreme Court, as modified by this Court, properly made?” For the reasons that follow, we answer the certified question in the negative.

II.

To combat the perceived harm to markets from frivolous private securities fraud class actions, Congress enacted the Private Securities Litigation Reform Act of 1995 (Pub L 104-67, 109 US Stat 737, codified in part at 15 USC §§ 77z-l, 78u-4 [the PSLRA]; see HR Rep 104-369, at 31-32 [1995]). The PSLRA created hurdles to discourage strike suits, including heightened pleading standards and an automatic stay of discovery once a defendant filed a motion to dismiss. These requirements were intended to make it difficult for plaintiffs to survive a motion to dismiss in nonmeritorious cases. “In enacting these changes, Congress made clear its belief that opportunistic trial lawyers were undermining the securities litigation system and were the primary target of the legislation” (Painter, Responding to a False Alarm: Federal Preemption of State Securities Fraud Causes of Action, 84 Cornell L Rev 1, 33-34 [1998]).

But passage of the PSLRA created an incentive for plaintiffs’ attorneys to shift class action litigation against publicly traded issuers from federal to state courts (see S Rep 105-182, at 3 [1998] [noting that during the course of hearings to review the effect of the PSLRA, “one disturbing trend became apparent; namely, that there was a noticeable shift in class action litigation from federal to state courts”]). Congress worried that this migration endangered “the benefits flowing to investors from a uniform national approach,” and, “beyond the number of, and dollar amounts involved, . . . created a ripple-effect that . . . inhibited small, high-growth companies in their efforts to raise capital, and . . . damaged the overall efficiency of our capital markets” (id. at 3-4 [internal quotation marks omitted]). To close this “ ‘federal flight’ loophole,” Congress enacted SLUSA, which effectively vested federal courts with exclusive jurisdiction, subject to stated exceptions not applicable here, for private securities fraud class actions (see Spielman v Merrill Lynch, Pierce, Fenner & Smith, Inc., 332 F3d 116, 123 [2d Cir 2003]).

SLUSA provides that no state or federal court may entertain a “covered class action” brought by a private party and based on state statutory or common law, which alleges fraud (misrepresentation or omission of a material fact) or manipulation in connection with the purchase or sale of a “covered security” (15 USC § 77p [b]). To implicate SLUSA, the complaint must advance

“either (1) an explicit claim of fraud or misrepresentation (e.g., common law fraud, negligent misrepresentations, or fraudulent inducement), or (2) other garden-variety state law claims that sound in fraud. A claim sounds in fraud when, although not an essential element of the claim, the plaintiff alleges fraud as an integral part of the conduct giving rise to the claim” (In re Kingate Mgt. Ltd. Litig., 2011 WL 1362106, *6, 2011 US Dist LEXIS 41598, *23-24 [SD NY 2011] [internal quotation marks and citation omitted]).

SLUSA defines a “covered class action” as a “single lawsuit” or “group of lawsuits” in which “damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members . . . predominate over any questions affecting only individual persons or members” (see 15 USC § 77p [f] [2] [A] [i] [I]; § 78bb [f] [5] [B] [i] [I]); a “covered security” is one traded nationally and listed on a regulated national exchange (see 15 USC § 77p [f] [3]; § 78bb [f] [5] [E]; § 77r [b]). As relevant to this appeal, SLUSA specifies that, for purposes of counting whether there are more than 50 persons or prospective class members, “a corporation, investment company, pension plan, partnership, or other entity, shall be treated as one person or prospective class member, but only if the entity is not established for the purpose of participating in the action” (15 USC § 77p [f] [2] [C]; § 78bb [fl [5] [D]).

Finally, SLUSA makes all “covered class action[s]” removable to the federal district court for the district in which the action is pending (15 USC § 77p [c]; § 78bb [f] [2]). “Congress inserted this provision so that federal courts, rather than state courts, would interpret the scope of the preemption under the statute” (M. Perino, Securities Litigation Under the PSLRA [formerly Securities Litigation After the Reform Act] § 11.03, at 11-14 — 11-15 [2010]; see also HR Rep 105-640, at 16 [noting that the removal provision was meant “to prevent a State court from inadvertently, improperly, or otherwise maintaining jurisdiction over an action” precluded by SLUSA]). The district court must dismiss any removed action that SLUSA precludes (see Romano v Kazacos, 609 F3d 512 [2d Cir 2010]). Conversely, the district court must remand a removed action to state court if it decides that SLUSA does not bar the suit; federal appeals courts lack jurisdiction to review an order directing remand (see Kircher v Putnam Funds Trust, 547 US 633 [2006]).

The question presented by this appeal is a difficult one, which will ultimately be resolved by the federal courts. The difficulty resides in SLUSA’s abbreviated treatment of bankruptcy trustees. In discussing the single-entity exemption, the Senate Report accompanying 1998 US Senate Bill S 1260, the bill that became SLUSA, made the point that the drafters had changed

“[t]he class action definition . . . from the original text of S. 1260 to ensure that the legislation does not cover instances in which a person or entity is duly authorized by law, other than by a provision of state or federal law governing class action procedures, to seek damages on behalf of another person or entity. Thus, a trustee in bankruptcy, a guardian, a receiver, and other persons or entities duly authorized by law (other than a provision of state or federal law governing class action procedures) to seek damages on behalf of another person or entity would not be covered by this provision” (see S Rep 105-182, at 8 [emphases added]).

In this case, the Trust is the successor of RGH, the debtor, under the Plan and the Trust Agreement, which were endorsed by the bankruptcy judge in the chapter 11 bankruptcy proceeding. The assets of RGH’s bankruptcy estate vested in the Trust, and these assets included claims of the bankruptcy estate’s creditors, who are the beneficiaries of any recoveries from Deloitte and Lommele. Thus, it could certainly seem that the Trust is an “entit[y] duly authorized by law ... to seek damages on behalf of another person or entity” (id.).

Moreover, chapter 11 plans apparently often call for this type of postconfirmation liquidation vehicle (PCLV) to collect, administer and distribute estate assets after the debtor’s plan has been confirmed. Indeed, “[t]he shortening of Chapter 11 timelines” effected by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Pub L 109-8, 119 US Stat 23 [BAPCPA]) may have “increas[ed] the importance and prominence of PCLVs” because they “allow a Chapter 11 debtor to focus preconfirmation on the more pressing needs of its reorganization or liquidation while deferring issues regarding illiquid estate assets, causes of action, and claims reconciliation until after confirmation of its plan” (Thau, Friedland and Geekie, Post-confirmation Liquidation Vehicles [Including Liquidating Trusts and Postconfirmation Estates]: An Overview, 16 J Bankr L & Prac 2 art 4 [2007]).

Further, liquidating trusts and postconfirmation estates seem to have grown in popularity because of the “post-Enron/ WorldCom world of Sarbanes-Oxley” in which we live, “where claims might exist against the debtor’s former insiders, accountants, financiers, and others” (id.). Because this kind of litigation is “complicated, expensive, and time-consuming,” it “can take years to get to trial and many months to try, not something that fits with BAPCPA’s contemplated timeline for plan confirmation” (id.). These issues may be resolved

“by transferring the right to bring these actions (with unsecured and secured creditors even agreeing to share in recoveries) to a PCLV Debtor’s management is no longer faced with the prospect of suing those with whom they have possibly worked or with the expense and distraction of contentious litigation, and it can devote its energies toward more pressing, internal reorganization efforts and plan confirmation issues. On the other hand, creditors do not face the same concerns or constraints as debtor management, and those creditors faced with little or no cash distribution under the plan[ ] are happy to take a flier on such litigation. By transferring this litigation to a PCLV debtor management can avoid unattractive litigation while creating incentives for plan approval” (id. [emphasis added]).

SLUSA’s single-entity exemption was first examined in the bankruptcy context in Cape Ann Invs. LLC v Lepone (296 F Supp 2d 4 [D Mass 2003]). There, Cape Ann, an investor syndicate, and other shareholders assigned their claims to a litigation trust created by the bankruptcy court to pursue any potentially recoverable assets of the bankruptcy estate. When the trustee of the litigation trust brought a state court action on the shareholders’ behalf against the defunct company’s accountants, the accounting firm (Deloitte, as in this case) removed the complaint to the federal district court, and moved to dismiss on the ground of SLUSA preclusion. In response, the trustee moved to remand. There were more than 50 of these shareholders (although Cape Ann itself was acknowledged to be a single entity).

The United States District Court for the District of Massachusetts held that the trust was not “one person” within the meaning of SLUSA’s single-entity exemption (296 F Supp 2d at 10). The Judge was principally persuaded that the trust was not “a unitary entity” because “[t]he Trust Agreement describe[d] the primary purpose of the Trust as prosecuting the Causes of Action contributed to it . . . and distributing to the [beneficiaries; i.e., the shareholders] the assets of the Trust remaining after payment of all claims against or assumed by the Trust” (id. [internal quotation marks omitted]).

Similarly, in LaSala v Bank of Cyprus Pub. Co. Ltd. (510 F Supp 2d 246 [SD NY 2007]), the United States District Court for the Southern District of New York looked to the “primary purpose” of a trust to decide whether it qualified for treatment as “one person” under SLUSA. In this case, a liquidating trust was formed under state law pursuant to three court orders issued in connection with the settlement of a securities fraud class action lawsuit involving AremisSoft, a bankrupt corporation, and its chapter 11 plan of reorganization (see LaSala v Bordier et Cie, 452 F Supp 2d 575, 578 [D NJ 2006]). Claims arising out of the purchase or sale of AremisSoft’s securities during the relevant time period and all of the company’s prebankruptcy claims were assigned to this trust.

The Judge concluded, based on various provisions in the trust agreement, that “the [AremisSoft] Trust was formed for the primary purpose of engaging in litigation” on behalf of more than 6,000 beneficiaries, and therefore “the entity exception [did] not apply” (LaSala, 510 F Supp 2d at 270). The same court, in another case involving the AremisSoft Trust, distinguished Smith v Arthur Andersen LLP (421 F3d 989 [9th Cir 2005]), discussed infra, on the ground that “the prevalence of ordinary bankruptcy-related tasks in the mandate of the trust [in Smith] precluded a finding that it was organized for the primary purpose of litigating trust claims” (LaSala v UBS, AG, 510 F Supp 2d 213, 237 [SD NY 2007]). The United States District Court for the District of New Jersey — which approved the creation of the AremisSoft Trust in the first place— distinguished that trust from the trust in Smith on the basis that the latter

“did not receive an assignment of claims from a class of shareholders pursuant to a class action settlement as in the instant case and in Cape Ann. Instead, the Smith trust was formed to be the bankruptcy estate’s representative for all purposes. Therefore, by the terms of its creation, the [AremisSoft] Trust, like the Cape Ann trust, functions more like a shareholder class representative than a traditional bankruptcy trustee, pursuing this litigation on behalf of a class of approximately 6,000 persons” (LaSala, 452 F Supp 2d at 584).

In Smith, the Ninth Circuit cited the reasoning of the District Court in Cape Ann with approval, noting that the Cape Ann court’s “suggestion] that an entity is not one person if its ‘primary purpose’ is to pursue causes of action” was “sensible” (Smith, 421 F3d 1007). Further, a

“contrary interpretation, under which any entity established ‘at least in part’ for the purpose of pursuing litigation is not a ‘person,’ [would be] inconsistent with [SLUSA’s] plain language, which provides that an entity ‘shall be treated as one person’ if the entity is not ‘established for the purpose of participating in the action.’ Moreover, that interpretation could potentially deprive many bankruptcy trustees of the ability to pursue state-law securities fraud claims on behalf of an estate. Nothing in SLUSA suggests that Congress intended to work such a radical change in the bankruptcy laws” (id. at 1007-1008).

The Smith court concluded that “pursuing causes of action” was not the trustee’s “ ‘primary’ purpose” because

“[t]he Debtor’s Plan, under which the Trustee was appointed, provides that the Trustee will ‘act as the Estates’ representative for all purposes, and will be responsible for (i) controlling and managing the consideration received from [the company to which some of the debtor’s assets were sold under the bankruptcy plan] and all Retained Assets, (ii) monetizing Retained Assets, (iii) filing, prosecuting and settling claim objections, (iv) administering the disputed claim reserve, (v) prosecuting and settling Estate causes of action, (vi) making distributions in accordance with the terms of the Plan, and (vii) winding-up and closing the Estates” (id. at 1008 [internal quotation marks omitted]).

The court held that “[b]ecause the Trustee [was] to ‘act as the Estates’ representative for all purposes,’ and not just for the purpose of pursuing causes of action, the Trustee [was] one person, and the Trustee’s Action [was] not a ‘single lawsuit’ barred by SLUSA” (id.). In Smith, unlike Cape Ann (and LaSala), the trustee was not asserting claims assigned to a trust by a debtor’s creditors, although this was not the reason given by the court for its decision.

More recently, the Third Circuit examined the single-entity exemption in LaSala v Bordier et Cie (519 F3d 121 [3d Cir 2008], cert dismissed 555 US 1028 [2008]), an appeal from the District Court’s dismissal (discussed earlier) of the state and Swiss law fraud claims brought by the trustees of the AremisSoft Trust against two banks. The defendants allegedly assisted the debtor’s officers and directors in a “pump and dump” scheme whereby after “pumping” the stock’s price by misrepresenting the company’s finances, the insiders “dumped” the stock on the market for unsuspecting investors to purchase at the artificially inflated prices. The court vacated the District Court’s order, holding that SLUSA did not preclude the action.

The Third Circuit observed that the trustees were claiming damages “in their capacity as assignees of the true injured parties,” and that “the injured party [was], at least in the first instance, AremisSoft,” while the banks asserted that the injured parties were, in fact, the “[purchasers in their individual capacities as purchasers of securities” (id. at 131). “Reading the complaint against the background of Delaware law,” the court first concluded that the complaint’s aiding-and-abetting claims were “originally owned by AremisSoft, and assigned to the Trust by the AremisSoft bankruptcy estate” (id. at 132). Put another way, the claims originally “belonged to AremisSoft, not to the purchasers of AremisSoft stock” (id.).

Turning to SLUSA, the Third Circuit then considered that the single-entity exemption, by its wording, directed judges “to follow the usual rule of not looking through an entity to its constituents unless the entity was established for the purpose of bringing the action, i.e., to circumvent SLUSA” (id. at 132-133; see also id. at 134 [“SLUSA’s single exception to this rule is that when (a) corporation is established for the purpose of litigation, i.e., when plaintiffs try to avoid SLUSA by running their securities claims through a corporate entity, the court should look to the corporation’s constituents”]). To evaluate the District Court’s ruling, the court opined that it was

“first necessary to recall the nature and ownership of these claims[, which] ... at one time belonged to AremisSoft, the entity allegedly injured by its Directors’ breaches of duty and the Banks’ aiding those breaches. In bankruptcy, the claims passed to AremisSoft’s bankruptcy estate . . . but the debtor-in-possession did not assert them during the pendency of the bankruptcy. Rather, the bankruptcy estate assigned them to the Trust, a state-law entity created in large part to pursue these and similar claims for the ultimate benefit of the Purchasers, the only group whose interests were impaired by the plan of reorganization. Thus, the Trust can only bring these claims as assignee of the bankruptcy estate” (id. at 133).

The court then observed that “[t]hough the parties do not go into detail on this point, one would assume that this deal was struck so that the Purchasers would vote to approve the plan of reorganization, even though their interests were impaired” (id. at 133 n 16).

The Third Circuit concluded that it was, in fact, irrelevant whether the AremisSoft Trust was established for the purpose of litigation; the purchasers were simply the beneficial owners of the claims assigned by the true injured party, AremisSoft, to the AremisSoft Trust. The banks argued that “allowing these claims to go forward [would] re-create a loophole for abusive securities litigation that Congress intended, through SLUSA, to close,” to which the court replied that it was difficult to “imagin[e] such assignments occurring outside very special contexts, such as bankruptcy, a context in which Congress clearly intended fiduciary-duty actions to go forward” (id. at 142).

Thus, the majority of the federal courts to have considered whether a liquidating trust may press state law fraud claims against a bankrupt corporation’s outside counselors and consultants for the benefit of the corporation’s creditors have zeroed in on whether the trust’s “primary purpose” is litigation of such claims. This was the analytical test applied by Supreme Court to decide that SLUSA does not preclude this action, and we agree with that court that, judged by the language in the Plan and the Trust Agreement, the “primary purpose” of the Trust is far broader than the pursuit of creditors’ causes of action.

There are many reasons why a liquidating trust appeals to debtors, creditors and bankruptcy courts. As the Third Circuit noted in LaSala, bankruptcy is a “very special context[ ]” where Congress clearly intended to preserve the prerogative of bankruptcy trustees to assert claims of bankruptcy estates (id. at 135-136). In short, the Liquidating Trust was not a device created by plaintiffs or their attorneys to circumvent SLUSA, which is what the statutory language precluding unitary status for entities created for “the purpose of participating in the action” was designed to forestall.

The dissent favors the approach taken by the Third Circuit, which did not assess the “primary purpose” of the particular trust at issue. Instead, based on an assessment of the pleadings in light of Delaware law, that court determined that AremisSoft, the bankrupt corporation, was the true “injured party” on whose “behalf” the litigation was brought, not the 6,000 purchasers who assigned their claims to the AremisSoft Trust. Indeed, the dissent is certain that the Third Circuit “would have held the present case to be barred by SLUSA” (dissenting op at 418). The facts in LaSala, however, are very different from the facts here.

In LaSala, the bankruptcy estate assigned the debtor’s claims to the purchasers and the purchasers separately assigned these claims (which were originally the debtor’s claims) to the AremisSoft Trust. Here, as previously discussed, the Plan transferred the bankruptcy estate’s assets, which included the litigation claims of RGH, RFS and their respective general unsecured creditors who did not opt out of the Plan, to the Trust. Under section 541 (a) (7) of the Bankruptcy Code, a bankruptcy estate includes “[a]ny interest in property that the estate acquires after the commencement of the case” (11 USC § 541 [a] [7]; see In re CBI Holding Co., Inc., 529 F3d 432, 457-458 [2d Cir 2008] [discussing the legislative history of section 541 (a) (7)]). In other words, the bondholders’ claims were property within the estate, and the Trust brought this action on behalf of the estate for the benefit of the bondholders. Put yet another way, in LaSala the creditors (i.e., the purchasers) owned the debtor’s (i.e., AremisSoft’s) claims and enlisted the AremisSoft Trust to prosecute the debtor’s claims for their benefit. Here, the debtor’s estate owned the creditors’ (i.e., the bondholders’) claims and enlisted the Trust to prosecute the estate’s claims for their benefit. We assume the Third Circuit would not have even needed to analyze the identity of the true injured party in LaSala if the purchasers’ claims had been included within a bankruptcy estate, rather than separately assigned by the purchasers to the AremisSoft Trust.

Finally, we have decided in this appeal, involving a pre-answer motion to dismiss, only that SLUSA does not preclude the bondholders’ lawsuit against Deloitte and Lommele, which adequately pleaded fraud. We do not opine on any issues related to the merits of these claims. When defendants interpose their answers they are, of course, free to plead any potentially applicable affirmative defense.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed, with costs, the order of Supreme Court reinstated, and the certified question answered in the negative.

Smith, J.

(dissenting). More than 50 bondholders of Reliance Group Holdings, Inc. (RGH) assigned claims to The RGH Liquidating Trust, which agreed to distribute to those bondholders the net proceeds resulting from any recovery on those claims. The Trust then brought this action asserting the claims of the bondholders (among others) against Deloitte & Touche and a Deloitte principal under New York law. The Trust alleges that Deloitte, as RGH’s auditor, fraudulently caused RGH’s financial condition to be misstated, thus inducing the bondholders to buy, or to refrain from selling, RGH bonds. The reason for bringing the case under state law is apparent: a federal securities law claim against Deloitte would have been time-barred (see Lampf, Pleva, Lipkind, Prupis & Petigrow v Gilbertson, 501 US 350, 364 [1991]; 28 USC § 1658 [b]).

Congress enacted the Securities Litigation Uniform Standards Act of 1998 (15 USC § 78bb [SLUSA]) to prevent exactly this kind of evasion of federal securities law barriers to suit. The majority nevertheless finds the Trust’s action on behalf of the bondholders permissible under SLUSA. It does so through a narrow reading of the statute that is inconsistent with the approach taken to similar questions by the federal courts.

SLUSA says: “No covered class action based upon the statutory or common law of any State . . . may be maintained in any State or Federal court . . . alleging ... a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security” (15 USC § 78bb [f] [1] [A]). It is undisputed that RGH’s bonds are covered securities; the issue here is whether the Trust’s lawsuit is a “covered class action.” SLUSA defines that term, in relevant part, as:

“any single lawsuit in which—
“(I) damages are sought on behalf of more than 50 persons . . . and questions of law or fact common to those persons . . . , without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons” (15 USC § 78bb [f] [5] [B] [i]).

This is a covered class action if the Trust is seeking damages “on behalf of more than 50 persons.” In common sense, of course it is: it is the assignee of more than 50 bondholders, and any damages it recovers will be distributed to those bondholders. Indeed, the Trust’s amended complaint says that it is suing “on behalf of the general unsecured creditors” of RGH, a term that includes the bondholders.

But the Trust argues, and the majority holds, that the action may be treated as though it were brought on behalf of only one person, the Trust, because of the following SLUSA provision, captioned “Counting of certain class members”: “For purposes of this paragraph, a corporation, investment company, pension plan, partnership, or other entity, shall be treated as one person . . . but only if the entity is not established for the purpose of participating in the action” (15 USC § 78bb [f] [5] [D]).

Deloitte argues, persuasively it seems to me, that this provision is not relevant to this case, because even if the Trust is “treated as one person” it is still suing “on behalf of’ more than 50 others — just as a class representative may be one person, but a class action will still be barred by SLUSA. If the “counting” provision is controlling here, however, that should not change the result.

The counting provision means, as the United States Court of Appeals for the Third Circuit has explained, “that the court is to follow the usual rule of not looking through an entity to its constituents unless the entity was established for the purpose of bringing the action, i.e., to circumvent SLUSA” (LaSala v Bordier et Cie, 519 F3d 121, 132-133 [3d Cir 2008]). The record makes clear that bringing actions like this one — and thus circumventing SLUSA — was an important part of the reason for the Trust’s creation. That was not, it is true, the Trust’s sole purpose. According to the Plan of Reorganization that brought the Trust into existence, it was “established . . . for the purposes of receiving the Trust Property and assuming the Assumed Liabilities, and liquidating and distributing the Trust Property for the benefit of the Trust Beneficiaries.” But the bondholders are “Trust Beneficiaries” and the “Trust Property” includes what the Plan calls “Creditor Litigation Claims”— among them the claims that the Trust is now asserting. Indeed, Creditor Litigation Claims, and the resulting proceeds, were viewed as a very significant part of the Trust’s assets. The Disclosure Statement prepared in connection with the Plan of Reorganization says: “on the Effective Date, the primary assets of the Liquidating Trust will consist of: (i) Causes of Action, including, but not limited to, the D&O Litigation Proceeds and the Creditor Litigation Proceeds.”

In short, bringing lawsuits like this one was one of the major purposes of the Trust. To treat the Trust as a single person when it is implementing that purpose, and to ignore the obvious fact that it is acting on behalf of more than 50 other persons, simply invites evasion of SLUSA. That, as I view it, is all there is to this case.

The majority reaches another conclusion through what seems to me a confused reading of SLUSA’s legislative history. It is true, as the majority says, that the legislative history shows that SLUSA’s authors did not want to bar litigation by trustees in bankruptcy and similar entities “duly authorized by law ... to seek damages on behalf of another person or entity” (S Rep 105-182, at 8 [quoted in majority op at 407]). That is why language in the draft legislation that might have been read to bar an action by a trustee in bankruptcy was deleted. But the majority ignores the difference, critical for SLUSA purposes, between a trustee in bankruptcy — who sues, ordinarily, on behalf of a single entity, the debtor — and a liquidating trust like this one, which is bringing claims assigned to it for the purpose of suit by more than 50 potential plaintiffs. Nothing in either the language or the legislative history of SLUSA suggests that Congress meant to grant an exemption to any “liquidation vehicle” that is doing precisely what SLUSA was enacted to prevent.

The federal cases dealing with this sort of question are consistent with the distinction I have made between the successor in interest to a single entity (e.g. a trustee in bankruptcy) and the assignee of many (e.g. the Trust here). That distinction is explicitly drawn by Judge Pollak’s opinion for the Third Circuit in LaSala.

LaSala was, in a critical way, the mirror image of this case: the claims being litigated there had originally belonged not to many entities, but to one, a bankrupt company called AremisSoft. The claims had passed, as the court explained, “from a corporation to its bankruptcy estate to a trust” (519 F3d at 126). That was the critical fact supporting the Third Circuit’s holding that the case was not barred by SLUSA. The court concluded, after a careful analysis, that the claims it was analyzing “originally belonged to AremisSoft, not to the purchasers of AremisSoft stock” (id. at 132). If the claims had originally belonged to the purchasers (of whom there were more than 50) the LaSala court would have come out differently. Interpreting the words of SLUSA that are critical here — “on behalf of more than 50 persons” — the court explained that that phrase

“seems to refer to someone bringing a claim on behalf of 50 injured persons. In other words, the phrase refers to the assignors of a claim, not to the assignee . . . Under this reading, the Trust is not bringing its claims ‘on behalf of the Purchasers, as SLUSA uses the term, because the Purchasers are not the injured parties; rather, the Trust is bringing the claims ‘on behalf of AremisSoft.” (Id. at 134.)

It is apparent that the LaSala court would have held the present case to be barred by SLUSA. Here, it is undisputed that “the assignors” were not a bankrupt corporation, but more than 50 bondholders. It is they, in LaSala’s terms, who are the “injured parties,” and this action is brought on their “behalf.” The majority takes a contrary view of LaSala’s application to this case, based, apparently, on the majority’s belief that the claims of the bondholders here were momentarily included in “the bankruptcy estate’s assets” (majority op at 414) — i.e., that the claims passed through the estate’s hands on their way from the bondholders to the Trust, rather than being directly assigned to the Trust by the bondholders. Even if true, that would be irrelevant under the LaSala court’s reasoning: it would not alter the fact that the bondholders were the injured parties. But I believe the majority is factually wrong: I see nothing in the record to support the assertion that the RGH bankruptcy estate ever owned these claims. The majority is correct in saying that the assignment of the claims from the bondholders to the Trust was effected in RGH’s Plan of Reorganization — but why this purely formal distinction would change the LaSala court’s analysis is something the majority does not explain.

Other federal cases are consistent with the LaSala approach. In Smith v Arthur Andersen LLP (421 F3d 989 [9th Cir 2005]), the action was brought by a trustee in bankruptcy, the successor in interest to a single entity, Boston Chicken, Inc. The court held the action not barred by SLUSA, observing that a contrary holding “could potentially deprive many bankruptcy trustees of the ability to pursue state-law securities fraud claims on behalf of an estate” (id. at 1008). By contrast, in Cape Ann Invs. LLC v Lepone (296 F Supp 2d 4 [D Mass 2003]), the court dismissed under SLUSA claims that had been assigned to a litigation trust by shareholders who claimed they had been induced to purchase, or to refrain from selling, stock in a company that went bankrupt. The trustee, as the court pointed out, had a duty to act “for the benefit of the . . . Shareholders. In that respect, his role is no different than that of any shareholder class representative” (id. at 10).

The Smith and Cape Ann opinions, like the majority opinion here, speak of the “primary purpose” for which a particular entity is formed. But unlike today’s majority, these federal cases address the “primary purpose” question with reference to the particular purpose being carried out in the lawsuit at hand— i.e., they in substance ask whether the lawsuit is an evasion of SLUSA or not. The Third Circuit in LaSala adopted what seems to me a more useful interpretation of SLUSA’s “established for the purpose of participating in the action” language: “when the corporation is established for the purpose of litigation, i.e., when plaintiffs try to avoid SLUSA by running their securities claims through a corporate entity, the court should look to the corporation’s constituents” (519 F3d at 134). Because that is exactly what happened here — the bondholders have tried to avoid SLUSA by running their claims through a liquidation trust — I would affirm the Appellate Division’s order dismissing those claims.

Chief Judge Lippman and Judges Ciparick, Graffeo, Pigott and Jones concur with Judge Read; Judge Smith dissents and votes to affirm in a separate opinion.

Order, insofar as appealed from, reversed, etc.

      . SLUSA was incorporated into both the Securities Act of 1933 (Pub L 73-22, 48 US Stat 74) and the Securities Exchange Act of 1934 (Pub L 73-291, 48 US Stat 881) in substantially similar form.

      . In May 2001, the parties to the federal securities class action entered into a Memorandum of Understanding (MOU) and Funding Agreement whereby underwriters of insurance coverage for RGH and its subsidiaries and directors would pay $17.4 million to settle the lawsuit (see In re Reliance Group Holdings, Inc. Sec. Litig., 2004 WL 943545, 2004 US Dist LEXIS 7666 [SD NY 2004] [granting the plaintiffs’ motion to enforce the MOU and Funding Agreement and describing the interrelated history of the federal securities class action, RGH’s bankruptcy and RIC’s liquidation]). The order and final judgment in this lawsuit, signed by the United States District Court Judge on March 22, 2006 and filed four days later, excluded Deloitte and Lommele from the class of persons eligible to participate in the settlement; specified that Deloitte and Lommele were not “Released Parties”; and excluded any claims against them from the definition of “Settled Claims,” “Settled Defendants’ Claims” and “Settled Insurance Claims.”

      . A “strike suit” has been defined as “an action making largely groundless claims to justify conducting extensive and costly discovery with the hope of forcing the defendant to settle at a premium to avoid the costs of the discovery” (Francis v Giacomelli, 588 F3d 186, 193 n 2 [4th Cir 2009], citing 5A Wright and Miller, Federal Practice and Procedure § 1296, at 46 and at 46 n 9]; see also Black’s Law Dictionary 1572 [9th ed 2009] [defining a strike suit as a lawsuit “based on no valid claim, brought either for nuisance value or as leverage to obtain a favorable or inflated settlement”]).

        . Courts often talk about SLUSA in terms of “preemption.” The United States Supreme Court in Merrill Lynch, Pierce, Fenner & Smith Inc. v Dahit (547 US 71, 87 [2006]), however, highlights that
      “SLUSA does not actually pre-empt any state cause of action. It simply denies plaintiffs the right to use the class-action device to vindicate certain claims. The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist.”
      In Habit, the Supreme Court interpreted SLUSA to preclude suits by “holders” of securities (i.e., those allegedly induced by fraud to retain or delay selling) as well as suits by purchasers or sellers.

      . Obviously, Deloitte and Lommele elected not to remove this lawsuit to the United States District Court for the Southern District of New York, as they were entitled to do.

      . And the federal courts continue to grapple with SLUSA. We note, for example, that two judges in the Southern District of New York are currently considering the question of whether the trustee appointed pursuant to the Securities Investor Protection Act (SIPA) for the consolidated liquidation of Madoff Securities may bring state common-law claims against third parties “for failing to adequately investigate Madoff Securities despite being confronted with myriad red flags and indicia of fraud” (Picard v HSBC Bank PLC, 450 BR 406, 409 [SD NY 2011, Rakoff, J.] [internal quotation marks omitted]; see also Securities Inv. Protection Corp. v Bernard L. Madoff Inv. Sec. LLC, 2011 WL 2119720, 2011 US Dist LEXIS 44126 [SD NY 2011, McMahon, J.]). Judge Rakoff observed that the trustee would “clearly” be an entity treated as one person under SLUSA “if the Trustee were suing on behalf of the Madoff Securities estate . . . However, . . . the Trustee [was] primarily suing, not on behalf of the Madoff Securities estate, but on behalf of thousands of customers. Thus, whether the Trustee’s Action is a ‘covered class action’ under SLUSA is a novel question” (450 BR at 413). A SIPA trustee is vested with the same powers and title with respect to the debtor and the debtor’s property as a bankruptcy trustee, in addition to those powers set forth in SIPA (15 USC § 78fff-1 [a]).

      . The original version of S 1260 defined a “class action” as
      “[A]ny single lawsuit, or any group of lawsuits filed in or pending in the same court involving common questions of law or fact, in which—
      “(A) damages are sought on behalf of more than 25 persons;
      “(B) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated; or
      “(C) one or more of the parties seeking to recover damages did not personally authorize the filing of the lawsuit” (see Painter, 84 Cornell L Rev at 48, at 47-49, 56-58 [discussing the original versions of HR 1689 and its near mirror image, S 1260, and changes in these bills as approved by each house, adopted by the House-Senate Conference Committee and passed by Congress]).
      By adding a single-entity exemption in the final bill to cover legal entities that may act on behalf of numerous beneficiaries, Congress made sure that, in bringing suits in their own names, these entities would be counted as one person, unless they were “established for the purpose of participating in the action” (see 15 USC § 77p [f] [2] [C]; § 78bb [f] [5] [D]).

      . The authors suggest additional reasons why liquidating trusts have grown in popularity in recent years: they (1) maximize value for creditors by increasing the speed of restructuring; (2) are consistent with the growing trend of major section 363 (11 USC § 363) sales and liquidating cases rather than stand-alone reorganizations; (3) provide a potential source of recovery to otherwise out-of-the-money creditors, creating an incentive for them to support the chapter 11 plan; and (4) reduce the expenses of administering the estate by eliminating the redundancy in professional costs.

      . The Judge actually dismissed this lawsuit on the basis of forum non conveniens, but nonetheless discussed the alternative ground of SLUSA preclusion in the event the circuit court disagreed (510 F Supp 2d at 267).

      . The interests of the senior and subordinated bondholders in this case were, of course, likewise impaired by the Plan.


author: Per Curiam.

text:
    [955 NE2d 343, 931 NYS2d 36]
    Diane Yatauro et al., Appellants, v Edward P. Mangano, as Nassau County Executive, et al., Respondents, and William T. Biamonte, Appellant.
    Argued August 24, 2011;
    decided August 30, 2011

      POINTS OF COUNSEL

      Jaspan Schlesinger LLP, Garden City (Steven R. Schlesinger of counsel), for Diane Yatauro and others, appellants.
    I. There is no basis in the Nassau County Charter to immediately redistrict the 19 legislative districts of Nassau County for the use in the 2011 general election. (Frank v Meadowlakes Dev. Corp., 6 NY3d 687; Leader v Maroney, Ponzini & Spencer, 97 NY2d 95; Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Rangolan v County of Nassau, 96 NY2d 42; Reynolds v Sims, 377 US 533; League of United Latin American Citizens v Perry, 548 US 399; Matter of Anderson v Board of Educ. of City of Yonkers, 46 AD2d 360, 38 NY2d 897.) II. The interpretation of Nassau County Charter § 112 as set forth in the August 9, 2011 Appellate Division, Second Department decision will lead to an absurd result. (Long v State of New York, 7 NY3d 269.)

      Thomas J. Garry, Mineola, for William T. Biamonte, appellant.
    I. The redistricting plan cannot be implemented for the 2011 election. (Matter of Gross v Albany County Bd. of Elections, 3 NY3d 251; Matter of Panio v Sunderland, 4 NY3d 123.) II. The plain language of the Nassau County Charter requires reversal of the appellate decision. (Frank v Meadowlakes Dev.

      Corp., 6 NY3d 687; Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577.) III. The appellate decision contradicts state law. (Matter of Monahan v Murphy, 71 AD2d 92; Matter of Gross v Albany County Bd. of Elections, 3 NY3d 251; Matter of Fahy v New York State Bd. of Elections, 104 AD2d 535; Matter of Fromson v Lefever, 112 AD2d 1064; Matter of Higby v Mahoney, 48 NY2d 15; Matter of Staber v Fidler, 65 NY2d 529; Matter of En-gel v Board of Elections of State of N.Y., 144 AD2d 175.) IV. Nassau County Charter §§ 113 and 114 fulfill the purpose of the legislative intent. (Matter of Ador Realty, LLC v Division of Hous. & Community Renewal, 25 AD3d 128; Schulman v Group Health Inc., 39 AD3d 223; Pataki v Kiseda, 80 AD2d 100; Matter of Schacht v Allen, 20 AD2d 507; People ex rel. Mason v Mc-Clave, 99 NY 83.)

      John Ciampoli, County Attorney, Mineola (Joseph Nocella, Alpa Sanghvi, Dennis J. Saffran and Andrew K. Preston of counsel), for Edward P. Mangano and another, respondents.
    I. Election Law § 4-106 (2) is inapplicable to this action. (City of New York v New York City Bd. of Elections in City of N.Y., 77 NY2d 938; Matter of Broda v Monahan, 309 AD2d 959; Matter of Engel v Board of Elections of State of N.Y., 144 AD2d 175; Matter of Monahan v Murphy, 71 AD2d 92, 51 NY2d 807; Bare-ham v City of Rochester, 246 NY 140; National Org. for Women v Metropolitan Life Ins. Co., 131 AD2d 356, 70 NY2d 939; Reynolds v Sims, 377 US 533.) II. The Appellate Division, Second Department, dissent’s conjuring of “absurd results” represents the type of theoretical speculation that this Court has cautioned against. (Matter of Westchester County Dept. of Social Servs. v Robert W.R., 25 AD3d 62; National Assn. of Ind. Insurers v State of New York, 89 NY2d 950; Pashcow v Town of Babylon, 53 NY2d 687.) III. The Appellate Division, Second Department, dissent’s allusion to “constitutional safeguards,” when there are no constitutional claims in this case, is unavailing: an interim redistricting to comply with one person/one vote more quickly than constitutionally required does not “deprive” anyone of “constitutional safeguards.” (Reynolds v Sims, 377 US 533.) IV. The Nassau County Charter has been properly applied and interpreted in this case. (Matter of Burke v Krug, 161 Misc 687; Mehiel v County Bd. of Legislators of County of Westchester, 115 AD2d 109, 78 NY2d 855; Leader v Maroney, Ponzini & Spencer, 97 NY2d 95; Ferrin v New York State Dept. of Correctional Servs., 71 NY2d 42; Rangolan v County of Nassau, 96 NY2d 42.)

      Bee Ready Fishbein Hatter & Donovan, LLP, Mineóla (Peter A. Bee, William C. De Witt, Stephen L. Mártir and Court Cousins of counsel), and Ryan, Brennan & Donnelly, LLP, Floral Park (John E. Ryan of counsel), for Peter J. Schmitt and others, respondents.
    I. The Nassau County Charter governs the disposition of the issues in this case. (Mehiel v County Bd. of Legislators of County of Westchester, 175 AD2d 109, 78 NY2d 855.) II. Municipal Home Rule Law § 35 empowers the Nassau County Legislature to interpret its own charter and local laws. III. Before the 2011 election cycle commenced, Local Law No. 3-2011 of the County of Nassau became the “law of the land.” (Transaero, Inc. v Biri Assoc. Corp., 39 AD3d 738; Wilson v Wilson, 21 AD3d 548; Matter of Maron v Silver, 14 NY3d 230; Hussein v State of New York, 81 AD3d 132.) IV. The Court should avoid judicial legislation. (Pajak v Pajak, 56 NY2d 394.) V. Legislative redistricting plans carry a “strong presumption of constitutionality.” (Matter of Wolpoff v Cuomo, 80 NY2d 70; Matter of Fay, 291 NY 198.) VI. Election Law § 4-106 (2) is inapplicable to this proceeding. VII. Even if the Legislature’s sole redistricting experience was an “established past practice,” the Legislature is free to establish new practices. (Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 286 App Div 28, 309 NY 569; Matter of Cowan v Kern, 41 NY2d 591; Grumet v Cuomo, 90 NY2d 57; Itri Brick & Concrete Corp. v Aetna Cas. & Sur. Co., 89 NY2d 786.) VIII. The trial court erroneously accepted, and relied upon, inadmissible statements of legislative intent. (Matter of Garufi v Bennett, 150 Misc 2d 799; Matter of Daniel C., 99 AD2d 35, 63 NY2d 927; McKechnie v Ortiz, 132 AD2d 472, 72 NY2d 969; Civil Serv. Empls. Assn. v County of Oneida, 78 AD2d 1004, 53 NY2d 603.) IX. Impossibility of performance is not an issue for review on this appeal.

      Carrie M. Solages, Elmont, amicus curiæ pro se.
    I. The Appellate Division decision should be reversed and the short form order of the Supreme Court should be affirmed finding that, pursuant to the Election Law and the Nassau County Charter there is no legal basis to immediately adjust the 19 legislative districts of Nassau County based upon the 2010 census data and implement Local Law No. 3-2011 of the County of Nassau for use in the upcoming 2011 general election of the Legislature. II. The Appellate Division, Second Department, dissent properly held that the implementation of Local Law No. 3-2011 of the County of Nassau in the 2011 election would violate the three-step process in Nassau County Charter §§ 112, 113 and 114 and would be inconsistent with the Election Law.
   OPINION OF THE COURT

Per Curiam.

In 1994, pursuant to a judicial determination that the system of “weighted voting” used by the local legislative body ran afoul of the Equal Protection Clause (see Jackson v Nassau County Bd. of Supervisors, 818 F Supp 509, 535 [ED NY 1993]), the Nassau County Board of Supervisors passed Local Law No. 11-1994 of the County of Nassau. To complete the court-ordered legislative restructuring, the Nassau County Commission on Government Revision was established and, after conducting public hearings, generated a proposal. The proposal ultimately resulted in the amendment of the County Government Law of Nassau County (hereinafter Nassau County Charter), approved by voter referendum, to establish a County Legislature comprised of 19 single-member districts, taking the place of the existing six-member Board of Supervisors (see Local Law No. 11-1994). The amendments included provisions setting forth the boundaries of the 19 legislative districts and providing procedures for reapportioning those districts based on the results of each decennial United States census. As first proposed by the Commission on Government Revision, section 112 of the Nassau County Charter constituted the core reapportionment provision. The outgoing Board of Supervisors, however, refused to approve the proposal in that form and added sections 113 and 114 to the final version of the Charter.

Section 112 mandates that “[t]he nineteen county legislative districts shall be set forth in the map attached hereto as Annex A, bounded and described in said Annex A” (Nassau County Charter § 112 [1]). In addition, the statute requires that

“[t]he County Legislature shall within six months after public announcement of the enumeration of the inhabitants of Nassau County in each decennial federal census commencing with the federal census for the year 2000, adopt a local law amending Annex A hereto to describe the nineteen county legislative districts which shall be based upon the new census data. Such local law shall comply with the legal and constitutional requirements for equal representation in the County Legislature of the residents of the county” (Nassau County Charter § 112 [2]).

Section 113 provides for an 11-member bipartisan commission — a “temporary districting advisory commission” — which would be “established [in] each legislative term in which the legislature is required to reapportion the county legislative districts as a result of the federal decennial census” (Nassau County Charter § 113 [1] [a]). The time frame for the appointment of commission members is “no earlier than one year and eight months before, and no later than one year and six months before, the general election of the county legislators to be held in the year two thousand and three and every ten years thereafter in accordance with the provisions of this section” (Nassau County Charter § 113 [1] [a]). The commission is to recommend a reapportionment plan for the 19 legislative districts and is permitted to hold public hearings, and hire consultants, experts and others as necessary to assist the commission with its work (see Nassau County Charter § 113 [2], [3]). The commission must submit its plans and recommendations to the County Legislature “[n]o later than ten months before the general election” (Nassau County Charter § 113 [4]).

Finally, the County Legislature can adopt the advisory commission’s proposed plan or any other redistricting plan that comports with constitutional and statutory requirements (see Nassau County Charter § 114). “The County Legislature, shall, no later than eight months before such general election . . . prepare and adopt by local law a final plan for the redistricting of the county legislature” (Nassau County Charter § 114).

On May 24, 2011, the County Legislature adopted Local Law No. 3-2011 of the County of Nassau, reapportioning the 19 legislative districts based on the results of the 2010 federal census, and specified new metes and bounds descriptions for each of the legislative districts. Petitioners assert that roughly 44% of the County’s population would be moved into new legislative districts as a consequence of the amendment. Respondents maintain that population shifts over the past decade have resulted in substantial deviations among the existing districts that mandate adjustment.

Plaintiffs/petitioners commenced this hybrid declaratory judgment action/CPLR article 78 proceeding on May 10, 2011, seeking a declaration that the implementation of Local Law No. 3-2011 in relation to the November 8, 2011 general election is null and void for lack of compliance with the Nassau County Charter. Supreme Court concluded that petitioners were entitled to partial relief because there was “no basis in the Nassau County Charter itself, the legislative intent, the legislative history, or the established past practice of the Legislature” for adjusting the district lines prior to the 2011 general election (32 Misc 3d 838, 852 [2011]). The court determined that sections 112 through 114 of the Nassau County Charter required that a three-step redistricting process be implemented before new lines are adopted for the 2013 general election. The court declared that adoption of Local Law No. 3-2011 was in accord with Nassau County Charter § 112, but that its implementation for use in the 2011 general election was ineffective for lack of compliance with Nassau County Charter §§ 113 and 114. The court further declared that new district lines based on the 2010 census data would not go into effect until the 2013 general election and therefore the 2011 general election would be held based on the district lines designated in Local Law No. 2-2003 of the County of Nassau.

The Appellate Division reversed insofar as appealed from, declaring that the legislative boundaries designated in Local Law No. 3-2011 must be implemented in connection with the 2011 general election and affirmed insofar as cross-appealed from, declaring that the adoption of the local law was in accord with Nassau County Charter § 112 (87 AD3d 582 [2011]). The Court found that the County Legislature was required “to formally amend Annex A,” not merely to propose new district lines that would not take effect until after the completion of a three-step redistricting process (87 AD3d at 587). The Court determined that the metes and bounds descriptions of the 19 legislative districts stated in Annex A, as amended by Local Law No. 3-2011, were the operative district lines to be used in the 2011 general election and that they would remain in effect until further amendment of Annex A.

Two justices dissented in part. They would have held that Nassau County Charter §§ 112 through 114 required a three-step process and that, although the adoption of Local Law No. 3-2011 was the first step in that process, it did not operate to alter the legislative district boundaries for the 2011 general election. Petitioners appeal to this Court as of right (see CPLR 5601 [a]) and we now reverse.

“When presented with a question of statutory interpretation, our primary consideration ‘is to ascertain and give effect to the intention of the Legislature’ ” (Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653, 660 [2006], quoting Riley v County of Broome, 95 NY2d 455, 463 [2000]). The starting point for discerning legislative intent is the language of the statute itself (see Roberts v Tishman Speyer Props., L.P., 13 NY3d 270, 286 [2009]). “Courts must harmonize the various provisions of related statutes and . . . construe them in a way that renders them internally compatible” (Matter of Dutchess County Dept. of Social Servs. v Day, 96 NY2d 149, 153 [2001] [internal quotation marks and citation omitted]).

Against this background, we consider the provisions at issue. The heart of the dispute between these parties is whether the new metes and bounds descriptions in Local Law No. 3-2011 apply to the 2011 general election or whether they are the first part of a three-step process to take effect in 2013.

The conflicting provisions of sections 112 and 113 can be reconciled only if section 112 is interpreted to provide for new metes and bounds descriptions as the initial step of an integrated process that includes consideration of the recommendations of a temporary commission with public input (see Nassau County Charter § 113), and culminates in the adoption of a redistricting plan “no later than eight months before [the] general election” (Nassau County Charter § 114). Such an integrated interpretation results in an orderly, deliberative process and avoids the prospect of redrawing district lines in two consecutive general elections.

For the reasons stated above, we hold that Supreme Court properly declared that Local Law No. 3-2011 is in accord with Nassau County Charter § 112, but that its implementation is null and void in connection with the November 8, 2011 general election for lack of compliance with Nassau County Charter §§ 113 and 114.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed, without costs, and the order and judgment of Supreme Court reinstated.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith, Pigott and Jones concur in per curiam opinion.

Order, insofar as appealed from, reversed, etc.