Complacency Can Cost You Federal Removal

Removal to federal court requires defendants to turn square corners. A slip-up can cost federal jurisdiction. In Reyes v. Hess Retail Stores, a federal judge in Brooklyn, New York, showed how a clever plaintiff’s attorney outwitted the defense and precluded removal, from the moment the complaint was filed in state court. Here is a lesson for us all.

Ajay Suresh from New York, NY, USA, CC BY 2.0 https://creativecommons.org/licenses/by/2.0, via Wikimedia Commons

The 30-day time limit to remove a case from state court to federal court commences when the defendant receives a written demand that exceeds the federal jurisdictional minimum of $75,000. Typically, that demand is found in plaintiff’s complaint. But not in New York. By statute, state-court complaints may not include a specific monetary demand. The complaint may state that the amount demanded exceeds the jurisdictional limits of all lower courts. The statute permits a defendant to request a supplemental written demand for damages, which is exchanged between counsel but not filed in court. The 30-day removal period begins when defendant receives a responding demand in excess of $75,000, or any other written statement of damages.

But when the defendant in Reyes removed the case to federal court within that later time period, the district court ruled the removal was too late. Why?

Mr. Reyes’ complaint in state court made no specific monetary demand and stated the usual phrase that the demand exceeded the jurisdictional limits of all lower courts. But plaintiff’s attorney added one more critical phrase: “including the minimum threshold for federal jurisdiction under 28 U.S.C. § 1332a) [the $75,000 requirement, softly spoken]. And that made the difference.

The defense had waited until it received a bill of particulars from plaintiff listing special damages totaling over $200,000 and then filed its notice of removal. The district court ruled that federal removal should have been filed within thirty days of service of the complaint: Any lawyer should know that alleging that plaintiff’s demand “exceeds the minimum threshold for federal jurisdiction under 28 U.S.C. §1332(a)” is no different than alleging the demand “exceeds $75,000.”

This court remanded the case to state court with this admonition from the court: “If plaintiff sought to capitalize on the possibility of defendant’s complacency, he was entitled to find a way to put explicit language in the complaint starting the removal period. That is what he did.” And that decision to remand is not appealable.

Don’t be complacent on federal removal issues. Read the complaint carefully.

Designated Counties Exclusion Leads to Coverage Denial in Product Liability Claim

Colleen Lorito worked at a Home Depot store in Freeport, New York, in Nassau County. She suffered a severe hand injury while working with a cutting machine designed to cut pre-made window blinds to meet the specifications of Home Depot’s customers. The blinds and cutting machines were marketed by Richland Window Coverings, LLC, doing business as Nien Made (America), headquartered in California. When Colleen and her husband filed a product-liability lawsuit against Richland in Nassau County, Richland’s insurer, Admiral Insurance Company, disclaimed coverage. Richland sued Admiral in its home state of New Jersey for a declaratory judgment that it owed coverage. On appeal, the New Jersey Supreme Court sided with Admiral. Here’s why.

The Admiral policy contains a “Designated New York Counties” Exclusion, listing the five counties that make up New York City, two nearby upstate counties, and the counties of Long Island – Nassau and Sussex. There would be no coverage for Richland for any liability “arising out of, related to, caused by, or in any way connected with . . . [any] operations or activities performed by [Richland]” in any of the designated counties. Admiral asserted that Richland’s activities at the Freeport Home Depot, in Nassau County, triggered the Exclusion, denying coverage to Richland for Colleen’s accident claim.

(Why all those counties? Five of those nine counties are actually defendants’ venues – especially Nassau and Suffolk.)

Richland argued before the New Jersey courts that it sold blinds and cutting machines to Home Depot, not to any specific store location. The Supreme Court looked beyond the four corners of the complaint to review all background facts, to determine that Colleen’s injuries were “connected with” and “related to” Richland’s operations and activities at the Home Depot in Nassau County. The allegations of the complaint alone were insufficient to answer the coverage question.

The Court gleaned from the record that Richland sells Nien Made window covering products to national retailers such as Home Depot. It also provides the cutting machines to cut the blinds to customers’ specifications, and a user manual for the retailers’ employees to learn how to use the cutting machines. Its representatives visit the stores, train employees on the machines and answer questions about the blinds and machines. They maintain and repair the machines, and replace cutting blades as needed, on site. All those activities occurred at the Freeport Home Depot store where Colleen was injured.

The Supreme Court found that Richland was more than a distant marketer. Its activities in Nassau County were sufficient to conclude that Colleen’s injuries were “connected with” and “related to” Richland’s operations and activities in Nassau County. The Exclusion was upheld, and Richland was denied liability coverage for Colleen’s Nassau County lawsuit.

For insurance-law purists, neither the Supreme Court nor the Appellate Division, below, explained why New Jersey insurance law governed the outcome. True, Admiral is a New Jersey-based insurer. But Richland is headquartered in California, where the policy was presumably delivered. Colleen is a New York resident, where she sustained her injury. A choice-of-law discussion is absent from the Supreme Court’s opinion. Nor is there any discussion of the purpose or enforceability of the Exclusion.

For insureds, you may be well advised to review your policies when issued, unless you have absolute confidence in your insurance broker to do so on your behalf. Here, Colleen’s lawsuit will proceed, but Richland will not have the benefit – or comfort – of coverage under the Admiral policy. That matters.

New York Legislature Passes Major Changes to Wrongful Death Act

For over one hundred years, New York law has restricted wrongful death damages to pecuniary losses sustained by a decedent’s family. The plaintiff’s bar has succeeded in persuading both houses of the State Legislature to pass the “Grieving Families Act” to add elements of grief or anguish caused by a decedent’s death. The amount to be awarded would be at the discretion of the jury, with no cap set in the legislation. It is now up to Governor Kathy Hochul, to sign the bill, or veto it, possibly with recommendations for changes. It is expected that opposing sides, such as the insurance industry, will be consulted by the Governor.

Specifically, the Act would add as compensation for wrongful death a value for the “grief or anguish caused by a decedent’s death, and for any disorder caused by such grief or anguish” and “the loss of love, society, protection, comfort, companionship, and consortium resulting from the decedent’s death.” Such damages have never been part of New York wrongful death claims and would greatly increase exposures for defendants and insurers if the Act becomes law in its present form. Among other things, the Act would provide compensation for the wrongful death of a child or other non-income producing family member. Under existing law, those claims have had relatively low pecuniary value. The Grieving Families Act takes its name from its aim to provide monetary damages because of grief suffered at the loss of a family member, even in the absence of pecuniary loss.

As written the Act would expand the statute of limitations from the present two years to three and one-half years from the decedent’s death. If signed by the Governor, the Act would take effect immediately and would apply retroactively to all pending actions, as well as actions commenced on or after that date.

We shall report further on any action by Governor Hochul.

Drastic Insurance Disclosure Rules Take Aim at New York Lawsuit Defendants

Even with some softening amendments taking effect February 24, 2022, New York’s 2021 Comprehensive Insurance Disclosure Act brings sweeping and burdensome new insurance disclosure demands for persons and companies named in lawsuits in New York state courts. Here’s what New York defendants and their insurers need to know.

The New Law and the New Requirements

  • Time of Insurance Disclosure
Photo by Pixabay on Pexels.com

Not later than 90 days after answering a complaint, the defendant must provide to the plaintiff “proof of the existence and contents of any insurance agreement” in the form of the insurance policy in place at the time of the loss.

But if the plaintiff agrees in writing, the defendant need only produce a copy of a declaration page. A plaintiff who agrees to accept a declaration page in lieu of the policy may later revoke that agreement and shall then be provided a full copy of the insurance policy.

  • Policies to be Disclosed

The insurance information and documentation provided, whether in the form of the policy or the declaration page, shall include “all primary, excess and umbrella policies, contracts or agreements, and self-insurance programs insofar as such documents relate to the claim being litigated.” [emphasis ours].

  • Additional Disclosures

The insurance disclosure must also provide the following:

a. The name and email address of an assigned individual responsible for adjusting the claim at issue; and

b. The total limits available under any policy, after taking into account erosion and any other offsets.

  • Reasonable Efforts

Defendant must make reasonable efforts to update the information given to any party, at the time of filing of the note of issue [the pleading that places the case on the trial calendar], when entering into any court settlement conference or voluntary mediation, at the time the case is called for trial, and for 60 days after entry of final judgment in the case, including all appeals.

  • Affidavits of Defendant and Defense Counsel

Unfortunately, one challenging provision in the original bill was not amended. Newly added Section 3122-b of the Civil Practice Law and Rules mandates that any insurance information provided must be accompanied by both an affidavit of the defendant [emphasis ours] and an affidavit or affirmation of the defendant’s attorney –

stating that the information is accurate and complete, and that “reasonable efforts” have

been undertaken to ensure that this information remains accurate and complete.

Under this provision defendants in New York lawsuits will need to appoint an individual with knowledge of the defendant’s insurance program to be able to execute such an affidavit. More problematic is the statute’s requirement that defense counsel also provide similar affidavits or affirmations, ignoring the fact that defense counsel learn about the insurance coverage from their clients, and not from personal knowledge.

  • Some Improvements Over the Original Bill

The amendments did provide some improvements. The time to serve insurance disclosure was extended from 60 to 90 days after the answer is filed. It is now clearly stated that disclosure of an insurance policy does not render it admissible in evidence at trial. Also clear is that such disclosure does not constitute an admission that an alleged injury is covered by the policy, obviously more helpful to the insurer than the insured defendant.

The original law required that these detailed insurance disclosures be made in all pending cases, not just in new lawsuits. The amendments remove the requirement from already pending lawsuits.

Going Forward

Navigating these new requirements will be challenging, and questions will abound. How far into excess coverage layers must defendants provide insurance disclosure? Why should layers of excess coverage have to be disclosed if they far exceed the value of the claim? Should defendants produce only declarations pages in the first instance? What if the affidavit of accuracy and completeness are not provided? Or, what if it turns out that the coverage disclosed is inaccurate?

These and many other issues, both legal and operational, will be faced under the new law. We would be pleased to discuss these new requirements and assist you to work through them.

May a Trucker and its Drivers Contract Around Section 1 of the Federal Arbitration Act?

The Supreme Court in New Prime v. Oliveria ruled a truck driver’s employment dispute – even that of an independent contractor – may not be ordered to arbitration under the Federal Arbitration Act. FAA § 1 exempts such contracts from the provisions of the Act. But can the parties agree in their arbitration provision to contract around Section 1? The Ninth Circuit says they may not. The story of its August 19th decision in Romero v. Watkins & Shepard Trucking and the Court’s reasoning are worth a look.

Alejandro Romero worked as a truck driver for Watkins from 1997 to 2019, making intrastate deliveries within California of goods that “had once crossed state lines,” facts essential to the Court’s conclusion that he was engaged in interstate commerce for purposes of FAA § 1. His employment contract contained an arbitration agreement calling for arbitration under the FAA and expressly contracting out of the application of Section 1’s exemption. That contract provision is at the center of the Court’s opinion.

In August 2019 Watkins announced it would cease operations and informed Romero and fellow workers that they would be laid off. Romero was terminated effective August 23, 2019. He filed a putative class action against Watkins in state court alleging violations of the California and federal WARN acts, for failing to give sufficient notice of the cessation of business. Watkins removed the case to federal court and moved to compel arbitration. Of interest here, Watkins argued that the exemption was inapplicable because Romero’s work was entirely intrastate.

The district court ruled that because Romero made intrastate deliveries of goods that had previously crossed state lines, he was engaged in interstate commerce, within the meaning of FAA § 1 exemption. The Ninth Circuit affirmed, citing its 2020 decision in Rittman v. Amazon and ruling that parties to an arbitration agreement may not “contract around the FAA’s transportation worker exemption.”

In the end, however, arbitration was ordered in a companion decision, because the arbitration agreement also invoked the law of Nevada in the event the federal act was held inapplicable. Nevada has no transportation-worker exemption similar to FAA § 1. The Ninth Circuit affirmed the district court’s order to compel arbitration under Nevada law.

Arbitration Continues After New Prime

The following was originally published in The Transportation Lawyer, February 2021, and is reprinted here with permission.

The 2019 decision of the Supreme Court of the United States in New Prime v Oliveira, shocked many in the transportation world, holding that the contracts of all truck drivers, including owner-operator independent contractors, are contracts of employment of transportation workers.  Under an exemption in Section 1 of the Federal Arbitration Act, the provisions of the FAA shall not apply to arbitration clauses in their contracts.  Thus, arbitration cannot be compelled against these workers under the FAA.

Transportation and arbitration lawyers have since worked to devise means to get to arbitration even in the face of New Prime.  Many have succeeded.  These are their stories (with apologies to the venerable television series, “Law and Order”).

To read the full article, click below:

Partner Peter Bobchin moderates TIDA Webinar

Peter Bobchin recently moderated a webinar sponsored by the Trucking Industry Defense Association’s Interactive Education Committee.  The webinar titled “Where We’ve Been and Where We’re Heading: Regulatory Updates in the New Administration” explored new regulations affecting the trucking industry by first taking a look back at changes made to trucking regulations at the end of 2020.  The focus then switched to what both trucking attorneys and industry professionals can expect to see under the Biden administration, and the new appointees to head the Department of Transportation and the Federal Motor Carrier Safety Administration. 

Panel members included TIDA attorneys Sarah E. Hansen of Burden, Hafner & Hansen in Buffalo, New York, and Stephen J. Cohen of Copeland, Stair, Kingma & Lovell, LLP in Atlanta, Georgia, doing a superb job of explaining some complex and intricate subjects of importance to the trucking industry.

The webinar covered recent regulatory developments on the issues of hours of service and electronic driver logs, emerging regulations impacting driver training and recruitment, and safety initiatives incorporating new and evolving technology.  Peter has been a member of TIDA for 17 years and his partner John Lane has been a member for most of TIDA’s existence.  Together, they co-author the New York law updates for TIDA.       

John Lane to Speak at TLA Chicago Regional Seminar

As with so many trainings, meetings, and conferences, the Transportation Lawyers’ Association 2021 Chicago Regional Seminar and Bootcamp, too, will be virtual this year. TLA President John Wilcox will open the Regional Seminar and Bootcamp from Kansas City, Missouri, via Zoom, at 1:00pm CST on January 20th. This online program will feature timely topics that are of interest to attorneys practicing all modes of transportation law. Topics have been chosen based on suggestions received from past attendees as well as recent developments in the law that affect the transportation industry and the practices of all transportation lawyers.

On that opening day, John Lane and Bill Pentecost, of Pittsburgh, will co-chair the Bootcamp segment, “Transportation Law in a Multi-Modal World,” which will address Maritime, Railroad, and Motor Carrier law. In addition, John will give a presentation on Intermodal Law and Commerce, emphasizing the inter-relationship of ocean, rail, and trucking commerce and the rights and liabilities of intermodal equipment leasing companies.

The Bootcamp is designed to introduce transportation law topics to lawyers who are beginning their transportation law careers, but is also attended by seasoned members of the TLA. Other Bootcamp presenters include Dustin Paul of Norfolk (Maritime law), John Fiorilla of New Jersey and Greg Summy of Virginia (Railroad law), and Steve Kennedy of Louisiana, Bridgette Blitch of Florida and Meghan Litecky of Kansas City, Missouri (Motor Carrier law).

The main portion of the Regional Seminar will be conducted on Thursday and Friday, January 21 and 22. The Seminar’s co-chairs are Tom Martin of New Jersey and Jason Orleans of Chicago. Non-members of the TLA are welcome to join us.

To learn more about the 2021 Bootcamp and Regional Seminar and to register, visit https://events.translaw.org/2021/chicago-regional/home/.

NJ: Eve of Trial Motion to Bar Expert Risks Rejection by Court

A new court practice rule will affect the timing of motions to bar crucial expert testimony. A motion in limine is commonly brought shortly before trial to allow a trial judge to trim issues of evidence to be admitted and streamline the actual trial. But a motion to bar an expert from testifying can be distinctly different. If the adversary’s case will fail without the expert, the motion is tantamount to a dispositive motion for summary judgment and must be made well ahead of trial.

Under the new court rule such a motion must now be made within the time frame for summary judgment motions, usually at least 30 days before trial. And if counsel waits until the eve of trial to file the motion as a motion in limine, the court may refuse to hear it. The reason, according to a 2015 Appellate Division case that spawned the new rule, is that such a motion made just before trial denies the adversary due process of law.

In Cho v. Trinitas Regional Med. Center, an appellate court grappled with a motion brought one day before jury selection, to bar plaintiff’s medical-malpractice expert witness from testifying. The witness was needed to sustain plaintiff’s burden of proof. So, as the court stated, this motion was really one for summary judgment because it could end the case, which should have been brought well ahead of trial to permit the adversary time to respond. The trial court granted the motion as one in limine, and dismissed the complaint. The Appellate Division reversed. Disguising a motion for summary judgment as a motion in limine denied plaintiff a fair opportunity to respond to the complaint-killing motion. Thus, the trial court’s ruling denied plaintiff fundamental due process. The Appellate Division stressed that the timing and sequence of a motion for summary judgment gives a reasonable framework to ensure due process.

The new rule applies to plaintiffs and defendants, and refers broadly to all types of expert witnesses, such as doctors, engineers, architects, accountants, economists, contractors, insurance and accident-reconstruction experts, to name a few, and without regard to the nature of the case. If a successful motion to bar an expert, such as an engineer in a product liability case, would lead to summary judgment, then the motion must be as one for summary judgment.

The rule can also be a blessing for defendants. A successful motion to bar expert testimony can lead to summary judgment well before trial. Judges hearing motions to bar critical expert testimony may no longer refer them to the time of trial as motions in limine, a frequent practice. These motions must be addressed when made, just as are motions for summary judgment. This is a good development for defendants.

So when your attorney asks authority to make an early motion to bar plaintiff’s expert, that just may be very good advice.

New Jersey’s First COVID-19 Era Jury Trial Stayed Over Jury Pool Concerns

New Jersey commenced its first COVID-19 era criminal jury trial in September in Bergen County, and an emergent application to the Appellate Division was filed even before opening statements began. The criminal defense attorneys raised a concern as to whether the resulting jury pool represented a cross-section of the community at large. The outcome of the Appellate Division’s decision could impact civil jury trials as they also begin.

To comply with social distancing rules and to curb the chance of spreading the virus, the New Jersey courts implemented a virtual preliminary screening process for prospective jurors in civil and criminal cases. In the criminal case before the Appellate Division, defense lawyers argued that the process excludes those jurors who do not have access to a computer or the internet. The trial judge denied defendant’s motion, but the Appellate Division granted a stay of the trial until defense counsel’s emergent application could be heard. The matter is to be fully submitted to the court by October 7th.

The Association of Criminal Defense Lawyers of New Jersey was granted leave to file an amicus curiae brief. The court also invited the Office of the Public Defender to appear as amicus. The court has not yet decided whether to grant oral argument on the application.

The court’s decision could affect the jury selection process in both civil and criminal cases moving forward, especially if the court rules in favor of the defense. The decision may likely be followed in neighboring states, including New York. New Jersey has commenced limited jury trials in three counties. The five counties that make up New York City are advising attorneys that no civil jury trials will be being commenced until 2021, and possibly not until the summer.

We will follow this story and its implications on the jury selection process moving forward.