author: Pigott, J.

text:
    [927 NE2d 1059, 901 NYS2d 575]
    Portfolio Recovery Associates, LLC, Respondent, v Jared King, Appellant.
    Argued March 23, 2010;
    decided April 29, 2010

      POINTS OF COUNSEL

      Jared King, appellant pro se.
    I. Plaintiff lacks standing to sue. (New York State Assn of Nurse Anesthetists v Novello, 301 AD2d 895; Rockland Lease Funding Corp. v Waste Mgt. of N.Y., 245 AD2d 779; People v Foster, 27 NY2d 47; Cornier v Spagna, 101 AD2d 141; Palmer v Hoffman, 318 US 109; Toll v State of New York, 32 AD2d 47.) II. The statute of limitations bars suit. (Global Fin. Corp. v Triarc Corp., 93 NY2d 525; In re Povill,
      105 F2d 157; Curtiss-Wright Corp. v Intercontinent Corp., 277 App Div 13; Pickett v Leonard, 34 NY 175; Brooklyn Bank v Barnaby, 197 NY 210; Hoover v Hubbard, 202 NY 289; Roth v Michelson, 55 NY2d 278; Education Resources Inst., Inc. v Piazza, 17 AD3d 513.) III. There is a lack of factual basis to grant summary judgment. (Marshall, Bratter, Greene, Allison & Tucker v Mechner, 53 AD2d 537; Brill v City of New York, 2 NY3d 648; New York Tel. Co. v Telesystems Corp., 27 AD2d 866; Gerard v Inglese, 11 AD2d 381; Colombini v Westchester County Healthcare Corp., 24 AD3d 712; General Inv. Co. v Interborough R.T. Co., 235 NY 133.) IV The trial court and Appellate Division decisions are unconstitutional and legally insufficient. (Matter of Stork Rest, v Boland, 282 NY 256; 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; People ex rel. Vega v Smith, 66 NY2d 130; Matter of Berenhaus v Ward, 70 NY2d 436.)

      Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains (Robert A. Spolzino of counsel), and Malen & Associates, PC, Westbury (Timothy J. Murtha of counsel), for respondent.
    I. Respondent’s action is not barred by the statute of limitations period. (National Bank & Trust Co. of N. Am. v Banco De Vizcaya, 72 NY2d 1005; Islamic Republic of Iran v Pahlavi, 62 NY2d 474; Martin v Dierck Equip. Co., 43 NY2d 583; Doctors Council v New York City Employees’ Retirement Sys., 71 NY2d 669; Uniformed Firefighters Assn., Local 94, IAFF, AFL-CIO v Beekman, 52 NY2d 463; Central Vermont R. Co. v White, 238 US 507; Education Resources Inst., Inc. v Piazza, 17 AD3d 513.) II. Respondent provided a clear chain of title and has established standing. (New York State Assn. of Nurse Anesthetists v Novello, 301 AD2d 895; Citibank [S.D.], N.A. v Martin, 11 Misc 3d 219; Johnson v Lutz, 253 NY 124; Chase Manhattan Bank [N.A.], Bank Americard Div. v Hobbs, 94 Misc 2d 780; Imbrie v Schlicht Combustion Process Co., 130 App Div 675; Romano v St. Vincent’s Med. Ctr. of Richmond, 178 AD2d 467; Tessier v New York City Health & Hosps. Corp., 177 AD2d 626.) III. The trial judge correctly granted summary judgment, where appellant admitted he defaulted on a revolving credit agreement and respondent provided sufficient evidence to award summary judgment. (G.W. White & Son v Gosier, 219 AD2d 866; Fink, Weinberger, Fredman, Berman & Lowell v Petrides, 80 AD2d 781; Shea & Gould v Burr, 194 AD2d 369; Feder v Fortunoff, Inc., 123 Misc 2d 857; Foley v Roche, 68 AD2d 558; Barclays Bank of N.Y. v Sokol, 128 AD2d 492.) IV The Supreme Court and Appellate Division decisions were legally sufficient. (Kolmer-Marcus, Inc. v Winer, 32 AD2d 763, 26 NY2d 795; Bingham v New York City Tr. Auth., 99 NY2d 355; Lefcourt v Sea Crest Hotel & Motor Inn, 54 Misc 2d 376; Men’s World Outlet v Steinberg, 101 AD2d 854; People v Lynch, 195 Misc 2d 814; Matter of Mayer v National Arts Club, 192 AD2d 863.)

      Lincoln Square Legal Services, Inc., New York City (Marcella Silverman and Elizabeth Maresca of counsel), for CAMBA Legal Services, Inc., and others, amici curiae.
    The Third Department’s failure to apply CPLR 202 to determine this action’s timeliness is inconsistent with this Court’s well-settled precedent. (Global Fin. Corp. v Triare Corp., 93 NY2d 525; GML, Inc. v Cinque & Cinque, P.C., 9 NY3d 949; Martin v Dierck Equip. Co., 43 NY2d 583; Education Resources Inst., Inc. v Piazza, 17 AD3d 513; Gorlin v Bond Richman & Co., 706 F Supp 236; Brinckerhoff v JAC Holding Corp., 263 AD2d 352; Insurance Co. of N. Am. v ABB Power Generation, 91 NY2d 180; TPZ Corp. v Dabbs, 25 AD3d 787; Citibank [S.D.], N.A. v Martin, 11 Misc 3d 219; JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373.)

      Janet Ray Kalson, New York City, Gina Calabrese, Carolyn E. Coffey, Anamaria Segura, Claudia Wilner and Marla Tepper, General Counsel, New York City Department of Consumer Affairs, for Association of the Bar of the City of New York and another, amici curiae.
    I. Summary judgment in this case was improper because the lower courts failed to apply CPLR 202 in determining whether the statute of limitations had run. (Global Fin. Corp. v Triare Corp., 93 NY2d 525; TPZ Corp. v Dabbs, 25 AD3d 787; Insurance Co. of N. Am. v ABB Power Generation, 91 NY2d 180; GML, Inc. v Cinque & Cinque, P.C., 9 NY3d 949.) II. Even if the Court finds that CPLR 202 does not apply in this case, the Appellate Division erred in finding that plaintiff timely filed the instant action under New York’s six-year statute of limitations. (Green v Disbrow, 79 NY 1; Aetna Life & Cas. Co. v Nelson, 67 NY2d 169; Global Fin. Corp. v Triare Corp., 93 NY2d 525; Victorson v Bock Laundry Mach. Co., 37 NY2d 395; Citibank [S.D.], N.A. v Martin, 11 Misc 3d 219; Lew Morris Demolition Co. v Board of Educ. of City of N.Y., 40 NY2d 516; Education Resources Inst., Inc. v Piazza, 17 AD3d 513; Bank of New York—Del. v Santarelli, 128 Misc 2d 1003; Stewart v Stuart, 262 AD2d 396; Donahue-Halverson, Inc. v Wissing Constr. & Bldg. Servs. Corp., 95 AD2d 953.) III. Summary judgment was improper in this case because plaintiff failed to prove standing. (Citibank [S.D.], NA. v Martin, 11 Misc 3d 219; PRA III, LLC v Gonzalez, 54 AD3d 917; Rushmore Recoveries X, LLC v Skolnick,
      15 Misc 3d 1139[A], 2007 NY Slip Op 51041[U]; Palisades Collection, LLC v Gonzalez, 10 Misc 3d 1058[A], 2005 NY Slip Op 52015[U]; MBNA Am. Bank, N.A. v Nelson, 15 Misc 3d 1148[A], 2007 NY Slip Op 51200[U]; TPZ Corp. v Dabbs, 25 AD3d 787; Copelco Capital v Packaging Plus Servs., 243 AD2d 534; GTF Mktg. v Colonial Aluminum Sales, 66 NY2d 965; Yermette v Kenworth Truck Co., 68 NY2d 714; JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373.)

      Michael J. Hutter, Albany, pro se, amicus curiae.
    I. The choice of law clause contained in the parties’ agreement specifying the agreement will be governed by Delaware law does not require the application of Delaware’s statute of limitations to plaintiffs claims. (Wyatt v Fulrath, 16 NY2d 169; Swift & Co. v Bankers Trust Co., 280 NY 135; Koob v IDS Fin. Servs., 213 AD2d 26; Welsbach Elec. Corp. v MasTec N. Am., Inc., 7 NY3d 624; A. S. Rampell, Inc. v Hyster Co., 3 NY2d 369; Cooney v Osgood Mach., 81 NY2d 66; Loucks v Standard Oil Co. of N.Y., 224 NY 99; Melcher v Apollo Med. Fund Mgt. L.L.C., 25 AD3d 482; Education Resources Inst., Inc. v Piazza, 17 AD3d 513; Ground to Air Catering v Dobbs Intl. Servs., 285 AD2d 931.) II. CPLR 202 is applicable to this action to recover the balance due on a credit card, and its proper construction, as informed by this Court’s decisions, requires the application of the pertinent Delaware statute of limitations. (Sun Oil Co. v Wortman, 486 US 717; Canadian Northern R. Co. v Eggen, 252 US 553; Klotz v Angle, 220 NY 347; Martin v Dierck Equip. Co., 43 NY2d 583; Miller v Brenham, 68 NY 83; Global Fin. Corp. v Triare Corp., 93 NY2d 525; Ledwith v Sears, Roebuck & Co., 231 AD2d 17; In re Gaston & Snow, 243 F3d 599; Antone v General Motors Corp., Buick Motor Div., 64 NY2d 20; National Sur. Co. v Ruffin, 242 NY 413.)

      Susan Ann Silverstein, Washington, DC, Julie Nepveu and Michael Schuster for AARP and others, amici curiae.
    I. Relaxation of strict legal standards invites collection abuses. (MBNA Am. Bank, N.A. v Nelson, 15 Misc 3d 1148[A], 2007 NY Slip Op 51200[U]; Smiley v Citibank [South Dakota], N. A., 517 US 735; Securities & Exch. Commn. v Merchant Capital, LLC, 483 F3d 747.) II. Collection of stale debt is fraught with problems. (Citibank [S.D.], N.A. v Martin, 11 Misc 3d 219.) III. Courts reject collection practices which violate basic principles of fairness and reliability. (Citibank [S.D.], N.A. v Martin, 11 Misc 3d 219; McCollough v Johnson, Rodenberg & Lauinger, 610 F Supp 2d 1247; Joosten v Gale, 129 AD2d 531; PRS Assets v Rodriguez,
      12 Misc 3d 1172[A], 2006 NY Slip Op 51148[U]; Levi v Oberlander, 144 AD2d 546; Garr v U.S. Healthcare, Inc., 22 F3d 1274; DeVivo v Sparago, 287 AD2d 535; Nielsen v Dickerson, 307 F3d 623; West Val. Fire Dist. No. 1 v Village of Springville, 294 AD2d 949; Palisades Collection, LLC v Kedik, 67 AD3d 1329.)
   OPINION OF THE COURT

Pigott, J.

In April 1989, defendant Jared King, then a resident of Connecticut, opened a credit card account with Greenwood Trust Company, a Delaware corporation with a principal place of business in Greenwood, Delaware. The agreement contained a standard choice of law clause stating that it would be governed by the laws of Delaware. Greenwood subsequently changed its name to Discover Bank.

It is undisputed that, on January 27, 1999, King sent a letter to Discover cancelling his credit card, which he had cut in half and enclosed with the letter. King demanded that Discover advise him on how to proceed in paying the card’s outstanding balance, but concededly made no payment on the account after December 1998. In August 2000, Discover transferred to plaintiff Portfolio Recovery Associates, LLC, “all right, title and interest in and to” King’s outstanding account.

On April 1, 2005, nearly five years after the assignment and more than six years after the account was canceled, Portfolio commenced this action against King, now a resident of New York, asserting causes of action for breach of contract and account stated. King asserts in his answer, among other things, that upon application of CPLR 202—this State’s “borrowing statute”—Portfolio’s claims are time-barred. Specifically, King claims that Delaware’s three-year statute of limitations for breach of a credit contract (see Del Code Ann, tit 10, § 8106) applies and, alternatively, Portfolio’s claims are untimely under this State’s six-year breach of contract limitations period (see CPLR 213 [2]).

Portfolio obtained summary judgment on its complaint. Supreme Court directed that judgment be entered in Portfolio’s favor and the Appellate Division affirmed (55 AD3d 1074 [2008]). We now reverse.

The Appellate Division properly concluded that the Delaware choice of law clause did not require the application of the Delaware three-year statute of limitations to bar Portfolio’s claims. Choice of law provisions typically apply to only substantive issues (see Tanges v Heidelberg N. Am., 93 NY2d 48, 53 [1999]), and statutes of limitations are considered “procedural” because they are deemed “ ‘as pertaining to the remedy rather than the right’ ” (id. at 54-55, quoting Martin v Dierck Equip. Co., 43 NY2d 583, 588 [1978]). There being no express intention in the agreement that Delaware’s statute of limitations was to apply to this dispute, the choice of law provision cannot be read to encompass that limitations period. We conclude, however, that the Appellate Division should have applied CPLR 202 to Portfolio’s claims to determine whether they were timely brought (see e.g. Global Fin. Corp. v Triarc Corp., 93 NY2d 525, 528 [1999] [“there is a significant difference between a choice-of-law question, which is a matter of common law, and (a) Statute of Limitations issue, which is governed by particular terms of the CPLR”]).

CPLR 202 provides, in relevant part, that “[a]n action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued.” Therefore, “[w]hen a nonresident sues on a cause of action accruing outside New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued” (Triarc, 93 NY2d at 528). If the claimed injury is an economic one, the cause of action typically accrues “where the plaintiff resides and sustains the economic impact of the loss” (id. at 529).

Portfolio, as the assignee of Discover, is not entitled to stand in a better position than that of its assignor. We must therefore first ascertain where the cause of action accrued in favor of Discover. Here, it is evident that the contract causes of action accrued in Delaware, the place where Discover sustained the economic injury in 1999 when King allegedly breached the contract. Discover is incorporated in Delaware and is not a New York resident. Therefore, the borrowing statute applies and the Delaware three-year statute of limitations governs.

That does not end the inquiry, however, because in determining whether Portfolio’s action would be barred in Delaware, this Court must “borrow” Delaware’s tolling statute to determine whether under Delaware law Portfolio would have had the benefit of additional time to bring the action (see GML, Inc. v Cinque & Cinque, P.C., 9 NY3d 949, 951 [2007]). Delaware’s tolling statute—Delaware Code Annotated, title 10, § 8117— provides that

“[i]f at the time when a cause of action accrues against any person, such person is out of the State, the action may be commenced, within the time limited therefor in this chapter, after such person comes into the State in such manner that by reasonable diligence, such person may be served with process. If, after a cause of action shall have accrued against any person, such person departs from and resides or remains out of the State, the time of such person’s absence until such person shall have returned into the State in the manner provided in this section, shall not be taken as any part of the time limited for the commencement of the action.”

Section 8117 was meant to apply only in a circumstance where the defendant had a prior connection to Delaware, meaning that the tolling provision envisioned that there would be some point where the defendant would return to the state or where the plaintiff could effect service on the defendant to obtain jurisdiction (see Williams v Congregation Yetev Lev, 2004 WL 2924490, *7, 2004 US Dist LEXIS 25432, *22 [SD NY 2004]). Indeed, Delaware’s highest court has held that the literal application of its tolling provision “would result in the abolition of the defense of statutes of limitation in actions involving nonresidents” (Hurwitch v Adams, 52 Del 247, 252, 155 A2d 591, 594 [1959]).

There is no indication that King ever resided in Delaware, nor is there any indication from the case law that Delaware intended for its tolling provision to apply to a nonresident like King. Therefore, we conclude that Delaware’s tolling provision does not extend the three-year statute of limitations. Moreover, contrary to Portfolio’s contention, it is of no moment that Portfolio was unable to obtain personal jurisdiction over King in Delaware; this Court has held that it is not inconsistent to apply CPLR 202 in such a situation (see Insurance Co. of N. Am. v ABB Power Generation, 91 NY2d 180, 187-188 [1997]).

Applying Delaware’s three-year statute of limitations, the instant action should have been commenced not later than 2002. Because the contract claims were not brought until 2005, they are time-barred in Delaware, where the causes of action accrued, and therefore they are likewise time-barred in New York upon application of the borrowing statute. This holding is consistent with one of the key policies underlying CPLR 202, namely, to prevent forum shopping by nonresidents attempting to take advantage of a more favorable statute of limitations in this state (see Antone v General Motors Corp., Buick Motor Div., 64 NY2d 20, 27-28 [1984]).

As a final matter, we note that only Portfolio sought summary judgment below. Absent a cross motion for summary judgment by King, we are not empowered to now grant that relief (see Stern v Bluestone, 12 NY3d 873, 876 [2009]; Falk v Chittenden, 11 NY3d 73, 78-79 [2008]; Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106, 110-111 [1984]).

Accordingly, the order of the Appellate Division should be reversed, with costs, and Portfolio’s motion for summary judgment should be denied.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Jones concur.

Order reversed, etc.


source: Caselaw Access Project

license: Public Domain

text:
    [928 NE2d 396, 902 NYS2d 14]
    Racepoint Partners, LLC, et al., Appellants, v JPMorgan Chase Bank, N.A., Respondent.
    Argued January 6, 2010;
    decided April 1, 2010

      POINTS OF COUNSEL

      Bartlit Beck Herman Palenchar & Scott LLP (James B. Heaton, III, of the Illinois bar, admitted pro hac vice, Cindy L. Sobel and Katherine G. Minarik of counsel), Joseph C. Smith, Jr., Denver, Colorado, and Kleinberg, Kaplan, Wolff & Cohen, P.C., New York City (David Parker and Marc Rosen of counsel), for appellants.
    I. The plain meaning of section 4.02 of the indenture agreement establishes that Enron did not satisfy its covenant by filing fraudulent reports. (UnitedHealth Group Inc. v Wilmington Trust Co., 548 F3d 1124; Securities & Exch. Commn. v Kalvex Inc., 425 F Supp 310; Morlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16.) II. The plain meaning of “required to file with the SEC pursuant to section 13 or 15 (d) of the Exchange Act” is supported by the express incorporation of Trust Indenture Act § 314 (a). (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 11 NY3d 146; Bluebird Partners, L.P. v First Fid. Bank, N.A. N.J., 85 F3d 970.)

      Simpson Thacher & Bartlett LLP, New York City (Thomas C. Rice, David J. Woll, Alan C. Turner, Janet A. Gochman and Devin F. Ryan of counsel), for respondent.
    I. The Appellate Division correctly held that there was no default under section 4.02 of the indenture agreement. (Brooke Group v JCH Syndicate 488, 87 NY2d 530; Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470; UnitedHealth Group Inc. v Wilmington Trust Co., 538 F Supp 2d 1108; Nichols v Nichols, 306 NY 490; Raner v Goldberg, 244 NY 438; Flagg v Yonkers Sav. & Loan Assn., FA, 396 F3d 178; AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 11 NY3d 146.) II. Separate and independent grounds exist upon which the dismissal of plaintiffs’ complaint may be affirmed. (Sega v State of New York, 60 NY2d 183; Hartley v Eagle Ins. Co. of London, England, 222 NY 178; Putman High Yield Trust v Bank of

      N.Y., 7 AD3d 439; Prudence-Bonds Corp. v State St. Trust Co., 202 F2d 555; Elkind v Chase Natl. Bank of City of N.Y., 259 App Div 661; Hazzard v Chase Natl. Bank of City of N.Y., 159 Misc 57, 257 App Div 950, 282 NY 652; Taussig v Clipper Group, L.P., 13 AD3d 166; Jordan Panel Sys. Corp. v Turner Constr. Co., 45 AD3d 165; Elliott Assoc. v J. Henry Schroder Bank & Trust Co., 655 F Supp 1281, 838 F2d 66; Midfirst Bank, SSB v C.W. Haynes & Co., Inc., 893 F Supp 1304.)

      Pillsbury Winthrop Shaw Pittman LLP, New York City (F. Joseph Owens, Jr., Edward Flanders and John E. Davis of counsel), for American Bankers Association, amicus curiae.
    I. Neither section 4.02 of the indenture agreement nor Trust Indenture Act § 314 (a) imposed any obligation on Enron to comply with the Securities Exchange Act. (Zeffiro v First Pa. Banking & Trust Co., 623 F2d 290; Affiliated Computer Servs., Inc. v Wilmington Trust Co., 565 F3d 924; UnitedHealth Group Inc. v Wilmington Trust Co., 548 F3d 1124; Bluebird Partners, L.P. v First Fid. Bank, N.A N.J., 85 F3d 970; LNC Inv., Inc. v First Fid. Bank, N.A., 935 F Supp 1333; Myer v Shields & Co., 25 AD2d 126; People v Kin Kan, 78 NY2d 54; Sharon Steel Corp. v Chase Manhattan Bank, N.A., 691 F2d 1039.) II. Adopting plaintiffs-appellants’ novel interpretation of Trust Indenture Act § 314 (a) would impose new duties on obligors and trustees. (Sharon Steel Corp. v Chase Manhattan Bank, N.A., 691 F2d 1039.)
   OPINION OF THE COURT

Pigott, J.

On February 7, 2001, the energy company Enron executed an indenture agreement with Chase Manhattan Bank (Chase), naming Chase as the indenture trustee for the holders of certain Enron notes. The agreement contained, in section 4.02, a standard provision setting forth a covenant by Enron

“[to] file with the Trustee [i.e. Chase], within 15 days after it files the same with the SEC [Securities and Exchange Commission], copies of its annual reports and of the information, documents and other reports . . . which the Company [i.e. Enron] is required to file with the SEC pursuant to Section 13 or 15 (d) of the [Securities] Exchange Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates). The Issuer also shall comply with any other provisions of Trust Indenture Act Section 314 (a).”

The agreement also set forth various circumstances or events that would constitute default by either party, including failure by Enron to comply with this provision, if not corrected within 60 days of notification by Chase.

In December 2001, in the wake of the major accounting fraud scandal with which it has become synonymous, Enron filed for bankruptcy. Thereafter, plaintiffs Racepoint Partners, LLC, and Willow Capital-II, L.L.C., bought approximately $1 billion of the notes from their holders. Plaintiffs, which, as secondary holders of the notes, are vested with the claims and demands of the sellers, then brought this common-law action against Chase alleging, among other things, breach of contract. Plaintiffs claim, first, that Enron defaulted under the indenture agreement and, second, that Chase had actual knowledge of this default and that its failure to notify Enron and the noteholders of the default constituted breach of the agreement. The issue in this appeal is the allegation of contractual default by Enron in filing reports that were false.

Plaintiffs point to the fact that Enron agreed in section 4.02 to file with Chase copies of all reports that it was “required to file with the SEC pursuant to Section 13 or 15 (d) of the [Securities] Exchange Act.” Section 13 of the Act requires publicly traded companies to keep records accurately reflecting their transactions and assets, and to file annual and quarterly reports with the Securities and Exchange Commission (see 15 USC § 78m). Plaintiffs argue that because the financial reports filed by Enron with Chase were inaccurate and did not comply with federal securities law, they were not the reports Enron was “required to file with the SEC.” Plaintiffs posit that, by filing these same fraudulent reports with Chase, Enron failed to satisfy its section 4.02 covenant, and thus defaulted.

Chase moved to dismiss the complaint under CPLR 3211. Supreme Court denied Chase’s motion. The Appellate Division reversed, granting the motion (57 AD3d 378 [2008]). We granted leave to appeal (12 NY3d 706 [2009]), and now affirm.

Section 4.02 of the indenture agreement is a mandated provision based on the requirements of section 314 (a) (1) of the Trust Indenture Act of 1939:

“Each person who, as set forth in the registration statement or application, is or is to be an obligor upon the indenture securities covered thereby shall . . .
“file with the indenture trustee copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the [Securities and Exchange] Commission may by rules and regulations prescribe) which such obligor is required to file with the Commission pursuant to section 13 or section 15 (d) of the Securities Exchange Act of 1934 [15 USC § 78m or § 78o (d)]; or, if the obligor is not required to file information, documents, or reports pursuant to either of such sections, then to file with the indenture trustee and the [Securities and Exchange] Commission, in accordance with rules and regulations prescribed by the Commission, such of the supplementary and periodic information, documents, and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934 [15 USC § 78m], in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations” (codified at 15 USC § 77nnn [a] [1]).

Plaintiffs concede that the parties’ intent in section 4.02 may be equated with congressional intent with respect to section 314 (a) of the Trust Indenture Act of 1939. In drafting the Trust Indenture Act, Congress intended simply to ensure that an indenture trustee was provided with up-to-date reports on a company’s financial status, by requiring the company to send the trustee a copy of filed financial reports. In the 1930s, when section 314 (a) was drafted, computer-based technologies, whereby copies of SEC reports can now be obtained, did not exist.

The legislative history of section 314 (a) suggests that Congress intended to create a delivery requirement and no more. The 1939 House Report highlighted the legislators’ concern that trustees and bondholders at the time did not receive periodic reports from companies issuing bonds.

“In a substantial portion of the indentures . . . the issuer was under no obligation to file an annual report with the indenture trustee. None of the indentures . . . required the transmission to the bondholders of periodic reports, such as stockholders customarily receive. None of them established machinery for the transmission of such reports . . . .” (HR Rep 1016, 76th Cong, 1st Sess, at 35 [1939].)

It is apparent that section 314 (a) was designed to mandate such a mechanism of delivery of reports to indenture trustees. The same House Report, observing that in many cases a company “will already be required to file periodic reports with the [Securities and Exchange] Commission under section 13 or section 15 (d),” stated that the bill under consideration “merely requires that copies of such reports ... be filed with the indenture trustee” (HR Rep 1016, 76th Cong, 1st Sess, at 35).

As federal courts have observed, when considering indenture agreement provisions very similar to the one at issue here,

“the provision merely requires the company to transmit to the trustee copies of whatever reports it actually files with the SEC . . .
“[A]ny duty actually to file the reports is imposed ‘pursuant to Section 13 or 15 (d) of the Exchange Act’ and not pursuant to the indenture itself. The provision does not incorporate the Exchange Act; it merely refers to it in order to establish which reports must be forwarded. . . .
“[It] impose[s] nothing more than the ministerial duty to forward copies of certain reports, identified by reference to the Exchange Act, within fifteen days of actually filing the reports with the SEC” (UnitedHealth Group Inc. v Wilmington Trust Co., 548 F3d 1124, 1128-1130 [8th Cir 2008]; see also e.g. Affiliated Computer Servs., Inc. v Wilmington Trust Co., 565 F3d 924, 930-931 [5th Cir 2009]; American Stock Transfer & Trust Co. v Par Pharm. Cos., Inc., 2009 WL 1754473, *4-5, 2009 US Dist LEXIS 52602, *10-13 [SD NY 2009]).

It is clear therefore that indenture agreements containing the required delivery provisions pursuant to section 314 (a) refer to the Securities Exchange Act only to identify the types of report that should be forwarded to indenture trustees. They do not create contractual duties on the part of the trustee to assure that the information contained in any report filed is true and accurate. That is simply not the mission or purpose of the trustee or the contract under which it undertakes its duties.

Of course, companies have a duty to file accurate reports with the SEC. That obligation, however, derives from the Securities Exchange Act, not from indenture agreements.

Our holding that section 4.02 of the indenture agreement simply embodies a delivery requirement, and does not imply a duty on the part of the trustee to assure the filing of accurate reports or risk default, is consistent with the limited, “ministerial” functions of indenture trustees (AG Capital Funding Partners, L.P v State St. Bank & Trust Co., 11 NY3d 146, 157 [2008]), and with the plain language of section 4.02, which states that “[d]elivery of such reports, information and documents [filed with the SEC] to the Trustee is for informational purposes only.” Plaintiffs’ proposed interpretation, on the other hand, would require indenture trustees to review the substance of SEC filings, so as to reduce the risk of liability, greatly expanding indenture trustees’ recognized administrative duties far beyond anything found in the contract.

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

Chief Judge Lippman and Judges Ciparick, Graffeo, Read and Jones concur; Judge Smith taking no part.

Order affirmed, with costs.

       On a similar theory, plaintiffs also allege that Chase breached its fiduciary duty to the noteholders. Plaintiffs concede that the dismissal of their breach of contract cause of action is fatal to the breach of fiduciary duty cause of action.


text:
    [928 NE2d 1025, 902 NYS2d 828]
    The People of the State of New York, Appellant, v James Kadarko, Respondent.
    Argued February 18, 2010;
    decided April 6, 2010

      POINTS OF COUNSEL

      Robert T. Johnson, District Attorney, Bronx (T. Charles Won, Joseph N. Ferdenzi and Allen H. Saperstein of counsel), for appellant.
    The Appellate Division erroneously decided that the trial court committed a mode of proceedings error when it informed the parties of the contents of the jury note, save for an inconsequential breakdown of the votes, before it instructed the jury. (People v Kisoon, 8 NY3d 129; People v O’Rama, 78 NY2d 270; People v Lykes, 81 NY2d 767; People v Starling, 85 NY2d 509; People v DeRosario, 81 NY2d 801; People v Michael, 48 NY2d 1; People v Hawkins, 11 NY3d 484; People v Gray, 86 NY2d 10; People v Dekle, 56 NY2d 835; People v Winkler, 71 NY2d 592.)

      Office of the Appellate Defender, New York City (Alexandra Keeling, Richard M. Greenberg and Joseph M. Nursey of counsel), for respondent.
    I. This Court should affirm the Appellate Division’s decision concluding that the error in this case was indistinguishable from the mode of proceedings errors in People v Kisoon (8 NY3d 129 [2007]) and People v O’Rama (78 NY2d 270 [1991]), where the trial court refused to show counsel the verbatim contents of a deadlock note, specifically the numerical breakdown of the jury’s division. (People v Kelly, 5 NY3d 116; People v Cook, 85 NY2d 928; People v Starling, 85 NY2d 509; People v Ahmed, 66 NY2d 307; People ex rel. Battista v Christian, 249 NY 314; People v Patterson, 39 NY2d 288; People v McLucas, 15 NY2d 167; People v DeRosario, 81 NY2d 801; People v Lykes, 81 NY2d 767; People v Martinez, 225 AD2d 474.) II. In the event that this Court reverses the Appellate Division’s decision reversing Mr. Kadarko’s conviction on the ground that the trial court committed a mode of proceedings error when it failed to inform counsel of the verbatim contents of a jury note, then this Court should remand the case to the Appellate Division to consider the other issues raised in Mr. Kadarko’s appellate brief to that court. (People v Gomez, 5 NY3d 416; Matter of

      Kadeem W., 5 NY3d 864; People v Smith, 97 NY2d 324; People v Coonan, 48 NY2d 772.)
   OPINION OF THE COURT

Pigott, J.

Defendant was indicted and tried for allegedly robbing food deliverymen on five separate occasions. During the course of jury deliberations, the jury sent several notes to the court. At issue on this appeal is the treatment of one of those notes, which stated:

“Are still divided as follows regarding alleged robberies on :“7/14/04 8 to 4 “7/26/04 11 to 1 “7/20/04 10 to 2 “8/3/04 l1 to 1 “8/9/04 11 to 1.”

Upon receiving the note, the trial judge, outside the presence of the jury, explained the note’s contents to counsel. Believing it inappropriate for him to show counsel the numerical breakdown of the votes, the judge declined to do so. Instead, he informed counsel that the note gave divisions among the jurors as to each robbery and date and that out of the five there were three different divisions. He further revealed that the numbers did not indicate whether the majority of the jury was voting to convict or acquit.

The judge then provided counsel with an opportunity to be heard. Neither the prosecutor nor defense counsel objected to the court withholding the specific numbers. Instead, defense counsel asked that the judge find the jury “hung” and declare a mistrial—a motion that was denied. The court then informed counsel that he was going to give the jury another Allen charge and that he would show counsel the entire note after he had done so. Neither counsel objected.

Following the Allen charge and resumption of deliberations by the jury, the judge showed counsel the note with the number divisions. There was no further discussion or objection voiced by either party. The jury ultimately convicted defendant on one count, but remained divided on all of the others, resulting in a mistrial being declared with respect to those counts.

Defendant appealed, arguing, among other things, that the trial judge committed a mode of proceedings error when he failed to inform counsel of the verbatim contents of the jury’s note including the numerical divisions. The Appellate Division, with one Justice dissenting, agreed and reversed defendant’s conviction (People v Kadarko, 56 AD3d 102, 107-108 [1st Dept 2008]). The dissenting Justice argued that the “slip” of the trial judge, which prompted no objection, could not amount to a mode of proceedings error (id. at 108-109 [McGuire, J., dissenting]) and granted the People leave to appeal to this Court (2008 NY Slip Op 91369[U] [2008]). We agree with the dissenting Justice and now reverse.

In People v O’Rama (78 NY2d 270 [1991]), we held that GPL 310.30 imposes two distinct duties on a court that receives a note from the jury: first, a duty to notify counsel about the note, and second, a duty to provide a “meaningful response” (id. at 276). We defined “meaningful notice” as notice of the actual specific contents of the jurors’ note (id. at 277). The court’s failure to disclose the specific contents of the note, we held, “had the effect of entirely preventing defense counsel from participating meaningfully in [a] critical stage of the trial and thus represented a significant departure from the organization of the court or the mode of proceedings prescribed by law” (id. at 277, 279 [internal quotation marks omitted]).

Later, in People v Starling (85 NY2d 509 [1995]), we held that when defense counsel is given notice of the contents of a jury note and has knowledge of the substance of the court’s intended response, counsel must object to preserve the claim for appellate review.

In People v Kisoon (8 NY3d 129 [2007]), where the court failed to read the note aloud and simply responded to the note on its own, we found that failure, as in O’Rama, to have deprived counsel of an opportunity to accurately analyze the jury’s deliberations and frame intelligent suggestions for the court’s response (id. at 135). Such a failure, we held, is “inherently prejudicial.” (Id.)

In the present case, unlike in O’Rama and Kisoon, the error does not amount to a failure to provide counsel with meaningful notice of the contents of the jury note or an opportunity to respond. Here, the judge informed counsel of the contents of the note and that he was specifically withholding the numbers from counsel until after the jury had retired to resume deliberations. Defense counsel voiced no objection to this procedure either before or after the entire contents of the note were revealed by the judge. Although the court’s decision not to read the entire note until after the jury had resumed deliberations may have been error, it was not a mode of proceedings error and the court later corrected itself, without objection or request for further instruction by either party.

Accordingly, the order of the Appellate Division should be reversed and the case remitted to that court for consideration of the facts and issues raised but not determined on the appeal to that court.

Judges Ciparick, Graffeo, Read, Smith and Jones concur; Chief Judge Lippman taking no part.

Order reversed, etc.


author: Chief Judge Lippman. Pigott, J. (dissenting).

text:
    [928 NE2d 399, 902 NYS2d 17]
    Howard S., Appellant, v. Lillian S., Respondent.
    Argued March 24, 2010;
    decided April 29, 2010

      POINTS OF COUNSEL

      Blank Rome, LLP, New York City (Jacqueline W. Silbermann, Donald Frank, Harris Cogan and Brett S. Ward of counsel), for appellant.
    I. The current split in the Departments should be resolved in favor of applying the same discovery rules in matrimonial actions as is permitted in other civil proceedings. (Armitage v Armitage, 115 AD2d 945; McMahan v McMahan, 100 AD2d 826; Ginsberg v Ginsberg, 104 AD2d 482; Hunter v Hunter, 10 AD2d 291; Plohn v Plohn, 281 App Div 1056; Pizzo v Pizzo, 33 Misc 2d 1022; Nomako v Ashton, 20 AD2d 331; Dunlap v Dunlap, 34 AD2d 889; Margulies v Margulies, 52 AD2d 567; Bloom v Bloom, 52 AD2d 1030.) II. In upholding the trial court’s decision, the First Department improperly restricted the doctrine of egregious fault in matrimonial actions breaking away from clearly established precedents of this Court and the Appellate Divisions. (Blickstein v Blickstein, 99 AD2d 287, 62 NY2d 802; O’Brien v O’Brien, 66 NY2d 576; Havell v Islam, 301 AD2d 339; Brancoveanu v Brancoveanu, 145 AD2d 395; Levi v Levi, 46 AD3d 520; Bragar v Bragar, 277 AD2d 136; Farkas v Farkas, 251 AD2d 4, 40 AD3d 207, 11 NY3d 300; Barnaby v Barnaby,

      259 AD2d 870.) III. Defendant’s conduct supports a claim for punitive damages. (Ross v Louise Wise Servs., Inc., 8 NY3d 478; Giblin v Murphy, 73 NY2d 769; Randi A. J. v Long Is. SurgiCtr., 46 AD3d 74; Swersky v Dreyer & Traub, 219 AD2d 321; Nardelli v Stamberg, 44 NY2d 500; Kujek v Goldman, 150 NY 176; Strader v Ashley, 61 AD3d 1244; Schehr v McEvoy, 43 AD3d 899; Keen v Keen, 124 AD2d 938; Cameron v Aurora Assoc., 19 Misc 3d 1112[A], 2008 NY Slip Op 50667[U].) IV Plaintiff’s fraud claim may include damages for his child support obligations and loss of property interests. (Lama Holding Co. v Smith Barney, 88 NY2d 413; Hanlon v Macfadden Pubis., 302 NY 502; Maharam v Maharam, 123 AD2d 165; Tuck v Tuck, 14 NY2d 341; Sargiss v Magarelli, 12 NY3d 527; Xiao Yang Chen v Fischer, 6 NY3d 94; Boronow v Boronow, 71 NY2d 284; Steitz v Gifford, 280 NY 15; Matter of Rothko, 43 NY2d 305; Matter of Shondel J. v Mark D, 7 NY3d 320.)

      Berkman Bottger & Rodd, LLP, New York City (Walter F. Bottger, Jacqueline Newman and Scott T. Horn of counsel), for respondent.
    I. This Court should not disturb the rule against discovery of marital fault. (McMahan v McMahan, 100 AD2d 826; Rubin v Rubin, 73 AD2d 148; Billet v Billet, 53 AD2d 564; Ginsberg v Ginsberg, 104 AD2d 482; Bill S. v Marilyn S., 8 Misc 3d 1013[A], 2005 NY Slip Op 51093[U]; Nigro v Nigro, 121 AD2d 833; Semon v Saridis, 125 AD2d 882; Lemke v Lemke, 100 AD2d 735; Bloom v Bloom, 52 AD2d 1030; Bingham v New York City Tr. Auth., 99 NY2d 355.) II. The Appellate Division correctly denied discovery for “egregious” marital fault. (Bragar v Bragar, 277 AD2d 136; Andon v 302-304 Mott St. Assoc., 94 NY2d 740; Matter of U. S. Pioneer Elecs. Corp. [Nikko Elec. Corp. of Am.], 47 NY2d 914; OBrien v OBrien, 66 NY2d 576; Farkas v Farkas, 251 AD2d 4, 11 NY3d 300; K. v B., 13 AD3d 12; Matter of Maurice T. v Mark P, 23 AD3d 567; Matter of Richard IV v Roberta Y., 240 AD2d 812; Blickstein v Blickstein, 99 AD2d 287; McMahan v McMahan, 100 AD2d 826.) III. There is no basis for an award of punitive damages. (Fiesel v Nanuet Props. Corp., 125 AD2d 292; Fox v Issler, 77 AD2d 860; Edison v Viva Intl., 70 AD2d 379; Walker v Sheldon, 10 NY2d 401; Rivas v AmeriMed USA, Inc., 34 AD3d 250; Ross v Louise Wise Servs., Inc., 8 NY3d 478.) IV Lost profits and child support expenses were properly excluded as damages for appellant’s fraud claim. (Lama Holding Co. v Smith Barney, 88 NY2d 413; New York Univ. v Continental Ins. Co., 87 NY2d 308; Kavner v Geller, 49 AD3d 281; Boyle v Burkich, 245 AD2d 609; Edison Stone Corp. v 42nd St. Dev. Corp., 145 AD2d 249; Kaufman v Kaufman, 127 AD2d 463; Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536; Greschler v Greschler, 51 NY2d 368; Zanett Lombardier, Ltd. v Maslow, 29 AD3d 495; Vermilyea v Vermilyea, 224 AD2d 759.)
   OPINION OF THE COURT

Chief Judge Lippman.

The dispute in this matrimonial action centers on the extent of discovery that should be permitted into issues of marital fault. As set forth in the complaint, plaintiff husband and defendant wife were married in May 1997. Defendant had one child from a previous relationship, who was later adopted by plaintiff. Three other children were born during the course of the marriage. The youngest child, born in 2004, was the product of an extramarital affair between defendant and an unidentified man. Plaintiff, unaware of his wife’s infidelity until the child was over three years old, has raised that child as his own. Plaintiff alleges that, although defendant knew or should have known that the child was not plaintiffs, she withheld that information from him.

In 2007, defendant allegedly commenced another extramarital affair with an individual who was initially named as a correspondent in this action. Plaintiff confronted defendant with his suspicions of her infidelity, but she denied that she was unfaithful. Defendant maintained that there were no grounds for divorce and the parties entered into the collaborative law process at her suggestion. Several months later, plaintiff obtained the results of a DNA marker test revealing that he was not the biological father of the youngest child.

Soon thereafter, plaintiff commenced this action asserting two causes of action for divorce—based on grounds of cruel and inhuman treatment and adultery—and a cause of action for fraud, seeking compensatory and punitive damages. The fraud allegations stated that defendant represented that she had been faithful to plaintiff and that he continued to participate in the marriage in reliance upon those representations to his financial detriment. He sought to recover damages under the fraud claim based upon costs he incurred due to defendant’s failure to disclose her adultery—specifically, the amounts he expended in support of the youngest child, profits from marital investments that he would have deferred and fees for the collaborative law process. Among other things, plaintiff sought equitable distribution of the marital property, alleging that the bulk of the property should be awarded to him due to defendant’s egregious fault. Defendant answered and asserted a counterclaim for divorce on the ground of abandonment.

Defendant moved to dismiss or sever the fraud cause of action and plaintiff cross-moved for liberal discovery relating to his fraud claim and to the issue of defendant’s egregious fault for purposes of equitable distribution. Supreme Court denied defendant’s motion to dismiss and found that the complaint stated a cause of action for fraud, but limited plaintiffs available damages to his pecuniary loss in the form of collaborative law process fees. The court also denied plaintiffs cross motion for liberal discovery, finding that defendant’s actions did not rise to the level of egregious fault.

A majority of the Appellate Division affirmed, agreeing that defendant’s behavior did not constitute egregious fault such that it could be considered for purposes of equitable distribution (62 AD3d 187 [1st Dept 2009]). The Court further found that plaintiff could only pursue his claims of actual pecuniary loss under the fraud cause of action and rejected the claims for lost profits, child support and punitive damages. One Justice dissented and would have allowed plaintiff to obtain liberal discovery on the issue of egregious conduct. The Appellate Division granted plaintiff leave to appeal (2009 NY Slip Op 74834[U] [2009]), and we now affirm.

Domestic Relations Law § 236 (B) (5) (d) sets forth the factors a court must consider when making an equitable distribution award. The statute does not specifically provide for consideration of marital fault, but does contain a catchall provision that allows a court to consider “any other factor which the court shall expressly find to be just and proper” (Domestic Relations Law § 236 [B] [5] [d] [14]). We have, however, rejected the notion that marital fault is a “just and proper” factor for consideration, “[e]xcept in egregious cases which shock the conscience of the court” (O’Brien v O’Brien, 66 NY2d 576, 589-590 [1985]). This rule is based, in part, upon the recognition that marriage is, among other things, an economic partnership and that the marital estate should be divided accordingly. We also observed that “fault will usually be difficult to assign and [that] introduction of the issue may involve the courts in time-consuming procedural maneuvers relating to collateral issues” (O’Brien, 66 NY2d at 590).

Although we have not had occasion to further define egregious conduct, courts have agreed that adultery, on its own, does not ordinarily suffice (see e.g. Newton v Newton, 246 AD2d 765, 766 [3d Dept 1998]; Lestrange v Lestrange, 148 AD2d 587, 588 [2d Dept 1989]). This makes sense because adultery is a ground for divorce—a basis for ending the marital relationship, not for altering the nature of the economic partnership. At a minimum, in order to have any significance at all, egregious conduct must consist of behavior that falls well outside the bounds of the basis for an ordinary divorce action. This is not to say that there can never be a situation where grounds for divorce and egregious conduct will overlap. However, it should be only a truly exceptional situation, due to outrageous or conscience-shocking conduct on the part of one spouse, that will require the court to consider whether to adjust the equitable distribution of the assets (see e.g. Levi v Levi, 46 AD3d 520 [2d Dept 2007] [attempted bribery of trial judge]; Havell v Islam, 301 AD2d 339 [1st Dept 2002] [vicious assault of spouse in presence of children]). Absent these types of extreme circumstances, courts are not in the business of regulating how spouses treat one another.

The complaint alleges that defendant committed adultery and that, as a consequence of that conduct, she conceived a child that she knew or should have known was fathered by another man and that she kept that information from plaintiff. Even taking these allegations as true, plaintiff has essentially stated a cause of action for adultery. While adultery, and many of its unintended consequences, will undoubtedly cause a great deal of anguish and distress for the other spouse, it does not fit within the legal concept of egregious conduct. Moreover, plaintiffs cause of action for fraud is based entirely upon defendant’s alleged adultery and on plaintiffs reliance upon the denial of that behavior. Plaintiff cannot obtain discovery for what is essentially an allegation of marital fault.

Although CPLR 3101 (a) provides for “full disclosure of all matter material and necessary in the prosecution or defense of an action,” Domestic Relations Law § 236 (B) (5) (d) is the specific statutory provision that governs equitable distribution in marital actions. Despite the general policy in favor of liberal discovery, this Court has interpreted the more specific section of the Domestic Relations Law to allow for consideration of marital fault in only a limited set of circumstances involving egregious conduct. In the absence of those circumstances, liberal discovery on issues of marital fault—at variance with O’Brien—should not ordinarily be permitted, though there may be exceptions in rare circumstances (see e.g. Anonymous v Anonymous, 71 AD2d 209, 214 [1st Dept 1979]). Despite the availability of protective orders if courts were to consider these matters on a case by case basis, there remains significant potential for abuse and harassment as a result of such discovery, as well as the possibility that parties will be induced to enter into disadvantageous settlements rather than litigate these types of intensely personal issues.

Plaintiffs contentions pertaining to permissible damages with respect to his fraud cause of action are without merit.

Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.

Pigott, J. (dissenting).

I respectfully dissent because, in my view, it is premature to rule that wife’s behavior does not, as a matter of law, constitute egregious misconduct for purposes of equitable distribution under the Domestic Relations Law. Therefore, husband is entitled to discovery on his claim.

It is well settled that parties are entitled to “full disclosure of all matter material and necessary in the prosecution or defense of an action” (CPLR 3101 [a] [1]). This provision makes no exception for matrimonial actions. Further, as the majority recognizes, this Court has held that marital fault may be considered under factor 14 of Domestic Relations Law § 236 (B) (5) (d) (14), which provides that a court may consider “any other factor which the court shall expressly find to be just and proper” (majority op at 435, citing O’Brien v O’Brien, 66 NY2d 576 [1985]). We limited such consideration of fault to “egregious cases which shock the conscience of the court” (O’Brien at 589-590). It is within the court’s discretion to determine whether a spouse’s misconduct is so egregious to justify consideration for purposes of equitable distribution. In my view, the court should make this determination with full disclosure of the misconduct.

The majority finds that discovery on the issue of fault is precluded in this case. Although neither party affirmatively moved for a ruling on the egregious misconduct claim, the majority reasons that the conduct alleged by husband is not so egregious as a matter of law to be considered for purposes of equitable distribution. In my view, this is putting the cart before the horse. Indeed, the majority has implicitly accepted the view of the First and Second Departments that a party is required to make a motion for discovery on the issue of fault (see Ginsberg v Ginsberg, 104 AD2d 482 [2d Dept 1984]; McMahan v McMahan, 100 AD2d 826 [1st Dept 1984] [two Justices dissenting]). I disagree with this approach, and rather, take the view of the Third and Fourth Departments that have no general prohibition of pretrial discovery on fault, relying on our liberal discovery rule (see Nigro v Nigro, 121 AD2d 833 [3d Dept 1986]; Lemke v Lemke, 100 AD2d 735 [4th Dept 1984]). Under that rule, husband is entitled to discovery on the issue of fault, albeit with the court overseeing and preventing abuses by asserting its protective power (see CPLR 3103 [a] [authorizing the court to issue a protective order “to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts”]). By first permitting discovery on the issue, the court may adequately consider whether the misconduct alleged does indeed “shock the conscience of the court” so as to warrant consideration for purposes of equitable distribution.

Further, I cannot agree with the majority’s reasoning for imposing a rule that would require a party to first seek permission from the court to obtain discovery on egregious fault. The majority reasons that, despite the court’s protective power, “there remains significant potential for abuse and harassment as a result of such discovery” (majority op at 437). However, considerations of abuse and harassment may be found in any contentious litigation. Further, fault is almost always an issue in a matrimonial case as a finding of fault or the living apart of the spouses are the only grounds for divorce in New York. Matrimonial cases often involve issues of a sensitive nature, and courts are well equipped to deal with the potential problems associated with them. Thus, disclosure should be permitted with restrictions imposed on a case-by-case basis, when problems peculiar to the particular case arise (see Connors, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C3101:15 [noting that CPLR 3101 (a) permits courts to restrict disclosure in specific cases where problems exist]).

Further, the majority believes there is a “possibility that parties will be induced to enter into disadvantageous settlements rather than litigate these types of intensely personal issues” (majority op at 437). At least one matrimonial scholar disagrees:

“Often, the pretrial examination can motivate settlement and avoid the far more bitter confrontation of the parties at trial, thereby paving the way for more harmonious post-divorce relationships. In any event, there would appear to be no valid reason to force matrimonial litigants to trial with less opportunity for disclosure and preparation than in any other civil action” (2 Tippins, New York Matrimonial Law and Practice § 16:29).

Assuming wife moved for a protective order limiting husband’s discovery on the issue of fault, I think the issue would be close. While adultery has generally been held not to be an act so egregious as to become a factor to be considered when distributing marital property, it may be a factor if it amounts to “egregious” misconduct. Here, wife not only committed adultery on more than one occasion, she also had a child out of wedlock and deceived both husband and child as to that child’s birth parent. In my view, it is premature without additional discovery to conclude at this juncture that wife’s misconduct is not so egregious to warrant consideration for purposes of the Domestic Relations Law.

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

Order affirmed, etc.

      . The parties indicate that they have stipulated to a divorce on the ground of constructive abandonment. A copy of that stipulation was not included in the record on appeal.

      . Although the Appellate Division opinion below generally stated the correct standard, to the extent that it can be read to limit egregious conduct to behavior involving extreme violence, the definition should not be so restrictive.

      . We note that since defendant did not cross-appeal the denial of the motion to dismiss the fraud cause of action to the Appellate Division, the issue of whether or not plaintiff stated a cause of action for fraud was not presented to that Court and is not before us.

      . This holding, of course, has no impact on a party’s ability to seek discovery for the dissipation of marital assets (see Domestic Relations Law § 236 [B] [5] [d] [12]).


author: CIPARICK, J. Pigott, J. (dissenting).

text:
    [928 NE2d 1027, 902 NYS2d 830]
    The People of the State of New York, Respondent, v Norman McBride, Appellant.
    Argued March 23, 2010;
    decided April 29, 2010

      POINTS OF COUNSEL

      Fried, Frank, Harris, Shriver & Jacobson LLP, New York City ((Joshua Roth, Peter Simmons and Jennifer Colyer of counsel), and Office of the Appellate Defender (Richard M. Greenberg and Daniel A. Warshawsky of counsel) for appellant.
    I. Because the police went to Mr. McBride’s apartment with the intent to arrest him but without a warrant, the subsequent arrest of Mr. McBride was unlawful, and the prosecution could not rely on the “emergency exception” to the warrant requirement to justify the warrantless arrest of Mr. McBride. (People v Adams, 53 NY2d 1; People v Mitchell, 39 NY2d 173; People v Coles, 62 NY2d 908; Brigham City v Stuart, 547 US 398; People v Molnar, 98 NY2d 328; United States v Barone, 330 F2d 543, 377 US 1004; People v Dillon, 44 AD3d 1068; People v Harris, 77 NY2d 434; People v Torres, 74 NY2d 224; People v Gokey, 60 NY2d 309.) II. Because any exigent circumstances that may have existed were created by the police, the warrantless entry into Mr. McBride’s apartment was unlawful, and the statements and physical items that were the products of that unlawful entry should have been suppressed. (People v Leonti, 18 NY2d 384; People v Levan, 62 NY2d 139; People v Bero, 139 AD2d 581; People v Lott, 102 AD2d 506.) III. The lineup that produced Mr. McBride’s identification was unduly suggestive because Mr. McBride was the only person displayed in the lineup wearing a gray hooded sweatshirt that precisely matched the eyewitnesses’ description of the clothing worn by the perpetrator. (People v Adams, 53 NY2d 241; People v Chipp, 75 NY2d 327; Foster v California, 394 US 440; People v Owens, 74 NY2d 677; People v Riddick, 251 AD2d 517; People v Bady, 202 AD2d 440; People v Davis, 169 AD2d 508; People v Velez, 169 AD2d 661; People v Sapp, 98 AD2d 784; People v Johnson, 79 AD2d 617.)

      Robert M. Morgenthau, District Attorney, New York City (Dana Poole and Alan Gadlin of counsel), for respondent.
    I. The lower courts’ determinations that exigent circumstances justified the police officers’ warrantless entry into defendant’s apartment are fully supported by the record. (Payton v New York, 445 US 573; People v Mitchell, 39 NY2d 173, 426 US 953; People v Levan, 62 NY2d 139; People v Molnar, 98 NY2d 328; United States v Knights, 534 US 112; United States v Reed, 572 F2d 412; Dorman v United States, 435 F2d 385; People v Cruz, 149 AD2d 151; People v Kilgore, 21 AD3d 1257; People v Mason, 248 AD2d 751.) II. The lineup was not rendered suggestive simply because defendant wore a gray sweatshirt. (People v Santos, 250 AD2d 413, 92 NY2d 905, 525 US 1076; People v Adams, 53 NY2d 241; People v Jackson, 98 NY2d 555; People v Chipp, 75 NY2d 327, 498 US 833; People v Amuso, 39 AD3d 425; People v Grant, 43 AD3d 800; People v Owens, 14: NY2d 677; People v Johnson, 79 AD2d 617; People v Bady, 202 AD2d 440; People v Sapp, 98 AD2d 784.)
   OPINION OF THE COURT

CIPARICK, J.

The primary issue presented by this appeal is whether defendant’s constitutional right to be free from an unlawful search and seizure was violated when the police entered his home without a warrant. We conclude that there is evidence in the record to support the determination that exigent circumstances justified the warrantless entry.

A grand jury indicted defendant for first degree robbery (Penal Law § 160.15 [4]), second degree robbery (Penal Law § 160.10 [1]), and other related charges stemming from an incident that occurred on March 21, 2004 at a Manhattan restaurant. Before trial, defendant pleaded guilty to attempted second degree robbery (Penal Law §§ 110.00, 160.10 [1]). Prior to defendant’s guilty plea, Supreme Court conducted a pretrial hearing to determine whether the police unlawfully arrested defendant and seized physical evidence in his home, whether defendant’s lineup was unduly suggestive, and whether the statements taken from defendant by the police violated defendant’s Miranda rights. Supreme Court denied defendant’s suppression motion in its entirety. The Appellate Division affirmed the judgment of conviction and sentence (59 AD3d 151 [1st Dept 2009]). A Judge of this Court granted defendant leave to appeal (12 NY3d 917 [2009]) and we now affirm.

There was evidence adduced at the hearing that, on March 22, 2004, Detective Shaska of the New York City Police Department went to a Cosi restaurant located on West 42nd Street in Manhattan to investigate a gunpoint robbery that occurred there the day before. Detective Shaska interviewed a number of the employees present at the time of the robbery including Elizam Mangual. Mangual told the detective that he first saw defendant and two other men come into the restaurant that afternoon, but that they had stayed only for a short period of time. Within the hour, however, Mangual noticed that the three men had returned. Defendant walked up to Mangual and told him that he had been a breadmaker at the restaurant. Moments later, Mangual saw defendant brandish a gun and direct the restaurant manager to the area where the safe is kept. Soon afterward, defendant and the two other men fled. Although Mangual did not see defendant take the money, defendant, in a written statement given to the police after his arrest, admitted to stealing money from the safe.

Detective Shaska also testified that Mangual provided her with a detailed physical description of defendant and told her that he was wearing a black waist-length flight jacket, a gray hooded sweatshirt, a black skull cap, dark blue jeans and was carrying gray construction gloves with circles when he committed the robbery. Detective Shaska requested a list of former employees of the restaurant from the district manager to develop a possible suspect. The district manager provided that list to her and defendant’s name appeared on it. Detective Shaska determined that defendant had a criminal record and obtained his photograph from police files. She then placed this photograph into a photo array that also contained five photographs of other men who looked similar to defendant. Detective Shaska showed this photo array to Mangual and he identified defendant as the gunman.

Following Mangual’s identification of defendant, Detective Shaska learned that defendant was on parole. When Detective Shaska returned to work on March 25, 2004, she contacted defendant’s parole officer who provided her with defendant’s address. At approximately 11:00 p.m. that evening, Detective Shaska and four other police officers went to defendant’s apartment. As the police officers approached defendant’s front door, they could hear voices coming from inside the apartment. The police officers knocked on the door for a few minutes and identified themselves, but no one answered. One of the police officers used the building intercom system to call defendant’s apartment and a person the police officer believed to be male answered. While three of the police officers remained outside of defendant’s front door, Detective Shaska and one of her partners went to the apartment directly below defendant’s in order to access the fire escape outside his apartment. From the fire escape, Detective Shaska peered through a window into defendant’s apartment and saw a man lying on the floor. Guns drawn, Detective Shaska or her partner knocked on the window and stated, “Police department. Open up the door.” A short time thereafter, Detective Shaska observed a different person run towards the door.

Detective Santeufemia, one of the police officers who remained at defendant’s door, testified that eventually a young woman, later known to the police as Lenora Mitchell, answered the door. She was crying and it also appeared to him that she was having difficulty breathing and was hyperventilating. Detective Santeufemia tried to calm her down and asked her, “Are you okay? Is everything all right?” Mitchell was unresponsive to his questions. Her appearance and inability to speak caused Detective Santeufemia to believe that she was facing a life-threatening situation. On this basis, he decided to enter defendant’s apartment to investigate. When he entered, he saw defendant standing in the hallway and handcuffed him.

Mitchell, a close friend of defendant, testified at the hearing for the defense. She explained that she was watching television with defendant and the lights in the apartment were off when they heard the police knocking at the front door. Defendant instructed her not to answer the door and they ignored the police officers’ repeated requests. Mitchell then became aware that there were police officers on the fire escape and she heard them say that they were going to enter the apartment through the window. Although it was dark inside the apartment, Mitchell testified that she saw one of the police officers on the fire escape point a gun at her face. She opened the front door and started to cry. Mitchell explained that the police officers calmed her down and assured her that everything was going to be all right.

The police then transported defendant to the station house and advised him of his Miranda rights. Defendant waived his rights and gave a statement admitting his involvement in the gunpoint robbery. Later, he was placed in a lineup and identified by three out of four witnesses.

We begin our analysis by looking at the federal and state constitutional proscriptions prohibiting the police from engaging in unlawful searches and seizures. It is axiomatic that warrantless entries into a home to make an arrest are “ ‘presumptively unreasonable’ ” (People v Molnar, 98 NY2d 328, 331 [2002], quoting Payton v New York, 445 US 573, 586 [1980]). Nevertheless, “[c]ourts have long recognized that the Fourth Amendment is not violated every time police enter a private premises without a warrant” (Molnar, 98 NY2d at 331). Indeed, provided that there is probable cause, the police may proceed without a warrant to effectuate an arrest within a home if exigent circumstances exist to justify a warrantless entry (see Kirk v Louisiana, 536 US 635, 638 [2002]; see also People v Burr, 70 NY2d 354, 360 [1987]).

In determining whether exigent circumstances are present, both the federal and state courts have applied a number of different factors. These factors include

“(1) the gravity or violent nature of the offense with which the suspect is to be charged; (2) whether the suspect is reasonably believed to be armed; (3) a clear showing of probable cause ... to believe that the suspect committed the crime; (4) strong reason to believe that the suspect is in the premises being entered; (5) a likelihood that the suspect will escape if not swiftly apprehended; and (6) the peaceful circumstances of the entry” (United States v Martinez-Gonzalez, 686 F2d 93, 100 [2d Cir 1982] [internal quotation marks and citations omitted]; see also United States v Reed, 572 F2d 412, 424 [2d Cir 1978]; People v Cloud, 168 AD2d 91, 92-94 [1st Dept 1991], affd 79 NY2d 786 [1991]).

We agree that these factors will appropriately assist a suppression court in its analysis of whether exigent circumstances are present, but are mindful that this list is illustrative and “not to be viewed as definitive or exhaustive” (Cloud, 168 AD2d at 94). Indeed, the ultimate inquiry a suppression court must make is “whether in light of all the facts of the particular case there was an urgent need that justifies a warrantless entry” (Martinez-Gonzalez, 686 F2d at 100 [internal quotation marks, parentheses and citations omitted]).

In this case, both Supreme Court and the Appellate Division concluded that exigent circumstances justified the warrant-less entry by the police into defendant’s home. On appeal, we note that defendant does not dispute the fact that the police had probable cause to arrest him for armed robbery, a violent crime. We also note that there is record support for the findings below that the police had strong reason to believe that defendant was inside his apartment and that they only entered defendant’s apartment after Mitchell opened the door and they observed that she was crying, hyperventilating, and unresponsive to their questions. These affirmed findings, having support in the record, preclude this Court’s further review (see People v Brown, 95 NY2d 942, 943 [2000]; People v Hallman, 92 NY2d 840, 842 [1998]).

Defendant argues, on the other hand, that it was the conduct of the police officers when they arrived at defendant’s home that created the exigency. Defendant maintains that it was the police who frightened Mitchell out of defendant’s apartment and caused her to appear distressed. To be sure, we have held that “the police themselves cannot by their own conduct create an appearance of exigency” (People v Levan, 62 NY2d 139, 146 [1984]). The courts below, however, rejected defendant’s assertion, and their finding on this factual issue, also having support in the record, is likewise beyond our further review (see Brown, 95 NY2d at 943; cf. Levan, 62 NY2d at 143 [no exigent circumstances where defendant simply opened the door for his neighbor and the police “with guns drawn, bypassed the woman, entered the apartment and arrested defendant inside”]).

However, in affirming the order of the Appellate Division, we are not unmindful of the fact that the police could have obtained an arrest warrant for defendant from a neutral magistrate before it dispatched five members from its force to defendant’s home. Indeed, three days passed from the time the police identified defendant as the gunman to the time they went to his home to arrest him. Although we acknowledge that there was nothing illegal about the police going to defendant’s apartment and requesting that he voluntarily come out (see People v Minley, 68 NY2d 952, 953 [1986]) and conclude that exigent circumstances in this case ultimately justified the warrantless entry, we recognize that it would have been more prudent if the police obtained a warrant for defendant’s arrest before going to his home.

Since exigent circumstances justified the warrantless entry into defendant’s home and his subsequent arrest, the seizure of the articles of clothing from defendant’s home that were in plain view and that matched the description provided by Mangual was proper. We also conclude that Supreme Court properly denied defendant’s motion to suppress his statements. There was evidence in the record to support that court’s determination that defendant voluntarily and knowingly waived his Miranda rights and agreed to be interviewed by the police.

Defendant’s final contention that the lineup was unduly suggestive because he was the only person wearing a gray hooded sweatshirt, an article of clothing which was part of a detailed clothing description provided to Detective Shaska by Mangual, is without merit. A lineup is nonsuggestive when the participants resemble each other so that the defendant is not “singled out for identification” (People v Chipp, 75 NY2d 327, 336 [1990]). The question whether a lineup is unduly suggestive is a mixed question of law and fact (see People v Jackson, 98 NY2d 555, 559 [2002]). If there is record support for the determinations of the lower courts that a lineup is not unduly suggestive, that issue is beyond this Court’s review (see id.).

Here, defendant and the five fillers were all African-American males who were of similar age and skin tones. They all had short hair and close-cropped beards. The men in the lineup were seated, mitigating any differences in height. Defendant’s sole issue with the lineup is the fact that he was wearing a gray hooded sweatshirt. Of course, where a suspect is the only one in a lineup wearing the same “distinctive clothing” as described by a witness to the crime, a lineup is unduly suggestive as a matter of law (People v Owens, 74 NY2d 677, 678 [1989]). In contrast, where the clothing described by the witness and then worn by the defendant at the lineup is “not unusual,” it is not considered suggestive (People v Gilbert, 295 AD2d 275, 277 [1st Dept 2002], lv denied 99 NY2d 558 [2002]; cf. Owens, 74 NY2d at 678 [defendant “conspicuously displayed” in lineup where he was the only person wearing “a tan vest and a blue snorkel jacket—which fit the description of the clothing allegedly worn by the perpetrator of the crime”]). Here, Supreme Court viewed a photograph of the lineup and noted that defendant and all the fillers were wearing nondescript street clothing and the gray hooded sweatshirt worn by defendant was a “generic and common article of clothing.” Moreover, since the sweatshirt was only one of the many items of clothing described by the witness, Supreme Court concluded that although defendant happened to be wearing the same type of sweatshirt in the lineup, it did not make the lineup unduly suggestive. Therefore, since the affirmed findings by the Appellate Division that the lineup was not unduly suggestive are amply supported by the record, this issue is likewise beyond our further review (see Jackson, 98 NY2d at 559).

Accordingly, the order of the Appellate Division should be affirmed.

Pigott, J. (dissenting).

What is clear from the record is that the police had several days to get an arrest warrant for the defendant and inexplicably failed to do so; and “exigency” does not cure that failure. It is for that reason that I respectfiilly dissent.

The day after the robbery, an employee of the restaurant provided a detailed description of defendant, a former employee, and he later identified defendant from a photo array. This provided sufficient probable cause to obtain a warrant for defendant’s arrest. Rather than immediately following up on this information or obtaining the warrant, however, no action was taken for the next three days. The police then obtained defendant’s address from his parole officer and, rather than applying for an arrest warrant at that time, five officers went to defendant’s apartment at 11 o’clock at night and began banging on the door.

According to one detective, she and another officer positioned themselves on the fire escape outside defendant’s apartment, weapons drawn, flashlights shining, and began knocking on the window, demanding that the occupants open the door. When Lenora Mitchell went to the door and opened it, she was visibly shaken. Because Mitchell was unable to answer the officers’ questions immediately, they entered the apartment “to see if there was some kind of life threatening situation.”

In Payton v New York, the United States Supreme Court held that the Fourth Amendment “prohibits the police from making a warrantless and nonconsensual entry into a suspect’s home in order to make a routine felony arrest” (445 US 573, 576 [1980]). One exception to that rule—the exigent circumstances exception—permits a warrantless entry into a suspect’s home “where certain urgent events occur that do not provide the police with sufficient time to obtain an arrest warrant” (Kamins, New York Search & Seizure § 3.04 [2] [b] [ii], at 3-32 [2009], citing People v Knapp, 52 NY2d 689 [1981]).

The majority concludes that there is record support for the conclusion by the lower courts that exigent circumstances justified the warrantless entry, pointing to the “record . . . findings” that “the police had strong reason to believe that defendant was inside his apartment and that they only entered [it] after Mitchell opened the door” and the police observed her condition (majority op at 446). In the majority’s view, this somehow justified their conduct. However, the real issue is “could the police, as required by the Fourth Amendment and legions of cases, have obtained a warrant prior to going to defendant’s apartment when they clearly intended to effect an arrest?” In my view, they could have, and should have, and because there was certainly no record support for the conclusion that the police were faced with an exigency other than that which they created, the warrantless entry constituted a clear Payton violation.

In making a determination as to whether circumstances exist justifying a warrantless arrest of a defendant in his home, the courts may consider the gravity of the crime, the defendant’s possession of and willingness to use a weapon, and the likelihood of an escape attempt (see e.g. People v Mealer, 57 NY2d 214, 219 [1982], cert denied 460 US 1024 [1983]). Other factors courts may consider include whether there is a reliable basis to believe that the defendant is on the premises, whether there is probable cause to believe that the defendant committed the crime, and the time of day of the police entry and whether the entry was peaceful in nature (Kamins, New York Search & Seizure § 3.04 [2] [b] [ii], at 3-33—3-34; see Dorman v United States, 435 F2d 385 [DC Cir 1970]). But cases addressing the issue of the warrantless arrest of a defendant in his home are in the context of the necessity for prompt action by the police such as found in Mealer and Dorman (see People v Hill, 70 AD3d 1487 [4th Dept 2010] [warrantless entry justified by exigent circumstances where victim, whose head was bleeding, was found near the crime scene, and police had reason to believe defendant was inside apartment with claw hammer]; People v Garcia, 27 AD3d 307 [1st Dept 2006], lv denied 6 NY3d 894 [2006] [warrantless entry proper where police were responding to a violent dispute and saw from a common hallway a man inside apartment with a gun]; People v Mason, 248 AD2d 751 [3d Dept 1998] [exigent circumstances present where police arrived at the scene shortly after the incident and suspected that the defendant committed a burglary]; People Jones, 134 AD2d 451 [2d Dept 1987], lv denied 70 NY2d 1007 [1988] [warrantless entry justified by exigent circumstances where police were led to the scene within minutes of the crime, where defendant had committed the violent offenses of sodomy and sexual abuse at gunpoint]).

It is only if one blindly applies the Mealer/Dorman factors without first considering facts leading up to the eventual arrest—that the police had probable cause to arrest defendant and at least three days to get a warrant—that one could conclude that the suppression court and the Appellate Division properly upheld the warrantless entry into defendant’s home. There is no evidence that the police faced circumstances where they had to act quickly to arrest defendant (see People v Bloom, 241 AD2d 975 [4th Dept 1997], lv denied 90 NY2d 938 [1997] [record did not support suppression court’s determination that exigent circumstances justified the failure of the police to obtain a warrant where the police were not in pursuit of defendant, the robbery had occurred 21 hours earlier and there was no indication that defendant was aware of the police presence and therefore was not likely to escape or destroy evidence]; People v Vennor, 176 AD2d 1217 [4th Dept 1991]; People v Martinez, 160 AD2d 351 [1st Dept 1990]). Nor was there testimony by the officers that it would have been burdensome for them to obtain a warrant (see People v Ramos, 206 AD2d 260 [1st Dept 1994] [People failed to establish that the warrantless entry by police officers was justified where there was no evidence that officers were in pursuit of a fleeing felon or that defendant was likely to destroy the money he had received or the drugs he had been selling, nor was there any testimony that it would have been burdensome for the officers to obtain a warrant]).

Defendant makes the further argument, citing People v Levan (62 NY2d 139 [1984]), that the police may not create the exigency. Whether or not the police created such an exigency is a question of fact to be determined by the suppression court; and here the record evidence seems clear that any exigency was the result of police conduct.

As to the post-arrest statements, I note that the Appellate Division found no need to address the issue of whether they were sufficiently attenuated from the illegal entry in the apartment, primarily because the Appellate Division concluded that the warrantless entry was proper. Therefore, this matter should be remanded to the Appellate Division to address defendant’s post-arrest statements and whether they were sufficiently attenuated from the warrantless entry.

Judges Graffeo, Read and Smith concur with Judge Ciparick; Judge Pigott dissents in a separate opinion in which Judge Jones concurs; Chief Judge Lippman taking no part.

Order affirmed.

       In holding that exigent circumstances justified the warrantless entry into defendant’s home, we need not determine if the police formed the subjective intent to arrest defendant at his home (see People v Mitchell, 39 NY2d 173, 177-178 [1976]). In any event, since defendant never raised the “primary motivation” argument in Supreme Court, it is unpreserved for our review.


author: Graffeo, J.

text:
    [928 NE2d 404, 902 NYS2d 22]
    In the Matter of Leon St. Clair Nation, Respondent, v City of New York et al., Appellants.
    Argued March 22, 2010;
    decided April 29, 2010

      POINTS OF COUNSEL

      Michael A. Cardozo, Corporation Counsel, New York City (Cheryl Payer and Stephen J. McGrath of counsel), for appellants.
    The Appellate Division erred in holding that the withdrawal of petitioner’s filing privileges for two years is a retroactive application of Administrative Code of the City of New York § 26-124 (c) (now Administrative Code § 28-211.1.2) which is a regulatory and not a penal statute. (Matter of Miller v DeBuono, 90 NY2d 783; Forti v New York State Ethics Commn., 75 NY2d 596; People v Weinberg, 83 NY2d 262; Matter of Abrams v Brady, 77 NY2d 741; Matter of Allied Grocers Coop,. v Tax Appeals Trib., 162 AD2d 791; Matter of Springer v Whalen, 68 AD2d 1011, 47 NY2d 710; Flemming v Nestor, 363 US 603; De Veau v Braisted, 363 US 144; Landgraf v USI Film Products, 511 US 244; Calder v Bull, 3 Dallas [3 US] 386.)

      Gregory Chillino, New York City, and Stuart A. Klein for respondent.
    Respondents-appellants’ imposition of Administrative Code of the City of New York § 26-124 (c) is unconstitutional and otherwise unlawful. (Matter of Mulligan v Murphy, 14 NY2d 223; People v Oliver, 1 NY2d 152; Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Fernandez-Vargas v Gonzales, 548 US 30; Landgraf v USI Film Products, 511 US 244; People v O’Brien, 111 NY 1; Garzo v Maid of Mist Steamboat Co., 303 NY 516; Buccino v Continental Assur. Co., 578 F Supp 1518; Matter of Cortland-Clinton, Inc. v New York State Dept. of Health, 59 AD2d 228; Matter of Garcia v Department of Educ. of City of N.Y., 18 Misc 3d 503.)
   OPINION OF THE COURT

Graffeo, J.

We conclude that the Commissioner of the New York City Department of Buildings (DOB) properly relied on New York City Administrative Code § 26-124 (c) in refusing to accept any documents submitted by petitioner, a professional engineer, for two years, followed by a three-year probationary period.

Petitioner Leon St. Clair Nation is an engineer licensed by the New York State Department of Education. In 2004, he placed his seal on digitally altered photographs submitted to DOB in connection with a pavement plan for a building under construction in Brooklyn. In early 2005, petitioner attested the accuracy of a falsified photograph in support of another pavement plan for a separate Brooklyn property. The following year, he offered a false application to DOB for alterations to a nonexistent second floor of a third Brooklyn parcel.

As a result of these filings, DOB commenced an administrative proceeding before the New York City Office of Administrative Trials and Hearings seeking to revoke petitioner’s professional certification privileges. Following a hearing, the Administrative Law Judge (ALJ) found, by a preponderance of the evidence, that petitioner had negligently certified the accuracy of the altered photographs and submitted a deceptive application, resulting in a recommendation that his professional certification privileges be rescinded.

The DOB Commissioner adopted the ALJ’s recommendation and revoked petitioner’s certification privileges with respect to the agency’s “Limited Supervisory Check and/or Professional Certification Program” (see 1 RCNY 21-01). Relying on a recently enacted provision—Administrative Code § 26-124 (c)— the Commissioner further precluded petitioner from filing any application or document with DOB, whether in connection with the Limited Supervisory Check/Professional Certification Program or otherwise, for two years, effective January 15, 2008, to be followed by a three-year probationary period.

Petitioner responded by commencing this CPLR article 78 proceeding challenging the Commissioner’s determination. He argued that the determination was not supported by substantial evidence; that the revocation of his certification privileges was excessive; and that Administrative Code § 26-124 (c) was inapplicable because it was enacted in 2007 after he engaged in the acts charged against him.

Upon transfer of the proceeding to the Appellate Division, that Court modified to the extent of vacating the penalty imposed pursuant to Administrative Code § 26-124 (c), and otherwise confirmed the determination (60 AD3d 468 [1st Dept 2009]). The Court held that substantial evidence supported the Commissioner’s determination that petitioner negligently certified the accuracy of submissions and that the Commissioner’s revocation of certification privileges did not shock the judicial conscience. But the Court held that Administrative Code § 26-124 (c) could not be applied retroactively by the Commissioner to bar petitioner from submitting any documents to DOB for two years, together with the three-year probationary period. We granted DOB leave to appeal (12 NY3d 713 [2009]).

New York City Administrative Code § 26-124 (c) provides, in relevant part:

“In addition to any other penalty provided by law, the commissioner may refuse to accept any application or other document. . . that bears the signature of any person who has been found, after a hearing at the office of administrative trials and hearings pursuant to the department’s rules, ... to have knowingly or negligently falsified or allowed to be falsified any certificate, form, signed statement, application, [or] report.”

Adopted by the Legislature in 2007, this provision was designed to “promote public safety and prevent the waste of taxpayer dollars by eliminating the repeated filing of false information relating to the construction and repair of buildings in New York City” (Senate Introducer Mem in Support, Bill Jacket, L 2007, ch 542, at 8, reprinted at 2007 McKinney’s Session Laws of NY, at 2041).

DOB argues that the Appellate Division erred in concluding that Administrative Code § 26-124 (c) was inapplicable in this proceeding. Relying on Matter of Miller v DeBuono (90 NY2d 783 [1997]), DOB submits that the Commissioner’s refusal to accept documents from petitioner for a future period of time did not amount to an improper retroactive application of the provision. We agree.

It is well settled under New York law that retroactive operation of legislation “is not favored by courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it” (Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 584 [1998]). But it is also true that “[a] statute is not retroactive . . . when made to apply to future transactions merely because such transactions relate to and are founded upon antecedent events” (Forti v New York State Ethics Commn., 75 NY2d 596, 609 [1990] [internal quotation marks and citation omitted]).

In Miller, a nurse aide physically abused a nursing home patient in 1991. After a hearing, the Commissioner of Health sustained the charge of patient abuse. Pursuant to 10 NYCRR 415.4 (b) (1) (ii) (b), enacted after the incident took place, the nurse aide was fired and prohibited from future employment with any nursing home. She commenced a CPLR article 78 proceeding, challenging the Commissioner’s retroactive enforcement of a regulation barring future employment once a finding of abuse had been lodged with the Nurse Aide Registry.

In rejecting the nurse aide’s contention, we concluded in Miller that the regulation had not been inappropriately applied retroactively. We reasoned that “where the requirements for engaging in specified professional activity are changed to govern future professional eligibility, a statute does not operate retroactively in any true sense even though its application may be triggered by an event which occurred prior to its effective date” (90 NY2d at 790 [internal quotation marks, citations, brackets and emphasis omitted]). We further explained that the provision was a safety measure designed to regulate future employment by precluding nursing homes from hiring nurse aides who had been previously found guilty of abuse. As a result, the Commissioner’s application of the regulation was not improper merely because the nurse aide’s disqualifying conduct occurred before its promulgation.

The Miller rationale controls the question of retroactivity in this case. Administrative Code § 26-124 (c) authorizes the Commissioner to refuse to accept applications or documents from “any person” found to have knowingly or negligently submitted falsified materials to DOB. By its terms, the provision aims to regulate future professional eligibility. And similar to the regulation at issue in Miller, the underlying purpose of the code provision is to promote public safety given the vast number of documents filed with and relied upon by DOB each year. The fact that petitioner’s inability to file papers with DOB for a future period of time is predicated on prior false filings does not render the Commissioner’s application of the provision retroactive. Hence, contrary to petitioner’s position, “the principles of statutory construction which require clear expression of a legislative intention to make a new provision retroactive are inapplicable here” (Forti, 75 NY2d at 610 [citations omitted]).

The Commissioner therefore properly relied on Administrative Code § 26-124 (c) in determining that DOB would preclude petitioner from submitting any documents for two years, with a three-year probationary period thereafter. Based on petitioner’s repeated certification and submission of false materials, we further conclude that the Commissioner’s determination does not shock the conscience (see Matter of Kelly v Safir, 96 NY2d 32, 38 [2001], rearg denied 96 NY2d 854 [2001]).

Accordingly, the judgment of the Appellate Division, insofar as appealed from, should be reversed, with costs, and the petition dismissed in its entirety.

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

Judgment, insofar as appealed from, reversed, etc.

      . Petitioner has not challenged in this Court the Appellate Division’s conclusions that the determination was supported by substantial evidence and that revocation of petitioner’s certification privileges under the Limited Supervisory Check/Professional Certification Program did not shock the conscience.

      . Pursuant to Local Law No. 8 (2008) § 21 of the City of New York, New York City Administrative Code § 26-124 (c) was recodified with minor changes in wording as Administrative Code § 28-211.1.2.

      . [2] For the same reason, we reject petitioner’s contention that Administrative Code § 26-124 (c), as applied to him, constitutes an ex post facto law in violation of the Federal Constitution (see Forti, 75 NY2d at 610 n 4).