Category: Uncategorized

by Carrie Mason-Draffen (carrie.mason-draffen@newsday.com)

DEAR CARRIE: I read with great interest your recent column that talked about the “suffer-to-work” concept and how hourly employees have to be paid for all hours worked, even if the extra time was unnecessary and unapproved. The idea doesn’t seem fair. What if your company handbook states that management has to approve extra hours ahead of time, yet an employee works overtime without that approval? And when those unapproved hours result in overtime pay because the employee winds up working more than 40 hours a week, it can be detrimental to a small business. If the work isn’t time sensitive and can be stopped at 4 p.m. and picked up the next day, it seems like the employee is calling the shots on extra hours. Are there any exceptions to this labor law?

—Suffering Employer

DEAR SUFFERING: Great question. For an answer, I turned to a lawyer who represents employers.

If an employer does not want an employee to work beyond normal working hours, the employer must take steps to prevent the employee from working, said Christine Malafi, a partner at Campolo, Middleton & McCormick in Ronkonkoma.

But if the hourly employee works, the employer has to pay, she said.

“This remains true even when the employer has not requested the overtime, or where the employee fails to report the overtime immediately,” she said.

“To establish an employer’s liability under the Fair Labor Standards Act for unpaid overtime, all that need be shown is an employee’s email, text, etc. related to employment during his or her off hours,” Malafi said.

What can you do to avoid the unauthorized work?

“To protect against this, employers should have written, clear policies outlining overtime rules and should not provide employees who are not authorized to work after hours with access to work emails, etc., from outside the office,” she said.

Read it on the Newsday website.

Movers & Shakers

Scott Middleton, a founding partner and trial attorney at Campolo, Middleton & McCormick in Ronkonkoma, was elected to the board of directors of Riverhead-based East End Arts.

East End Arts adds one to board

By Patrick McCormick

In 2010, the First Department, in dismissing a claim by commercial tenants that electric charges were unconscionable,  held that the plaintiffs had failed to establish “a lack of meaningful choice, and noted that the commercial tenants were free to not rent from the defendant and go elsewhere.”[i]

Thus, when I represented a commercial landlord in a non-payment proceeding against a law firm tenant earlier this year, it was unclear where a court within the Second Department – in this case, the First District Court in Nassau County – would fall on the issues of a five percent late charge and electric charges to which the tenant objected.[ii]  The landlord’s rent demand sought $2,531.70 including a five percent late charge plus electric charges of $993.52, as well as taxes and attorneys’ fees for an unrelated proceeding.

Turning first to the late charge, the tenant argued that the charge was “illegal” in that it was usurious and “does not in any way even remotely apply to damages actually sustained and is an unconscionable penalty.”  In response, we argued on behalf of the landlord that the late fees were not usurious, as the fees existed in connection with a commercial lease, not a loan or forbearance, nor were they unconscionable, as they were negotiated by sophisticated business people specifically for a commercial lease.

Regarding the electric charges, the tenant argued that because it occupied only a small part of the commercial premises, the sum of $993.52, which was a fixed amount set forth in the lease, was “disproportionate” to their actual electricity consumption.  The parties disagreed over whether the landlord was obligated to furnish an accounting of the actual electric usage and bills; the landlord pointed out that the tenant had paid the monthly electric charge – which the landlord did not dispute was not based on actual usage – for over a decade.

The tenant commenced an action in Nassau County Supreme Court seeking reimbursement of the “excess” electricity payments and a return of funds withheld from a security deposit as determined by a prior summary proceeding in District Court.  The tenant argued that the Supreme Court had jurisdiction over the entire dispute (even that piece pending in District Court) as the tenant was seeking a declaratory judgment and equitable relief, for which the District Court lacks jurisdiction.  Upon Landlord’s motion, the Supreme Court dismissed the Complaint.  The Supreme Court found that “[t]o the extent plaintiff claims that the electric charge is exorbitant, it is what he agreed to, and nothing more…The fact that a landlord may make a profit on the payments for electricity, is no defense to a tenant.”[iii]  The Court reached a similar conclusion regarding the late fee, noting that “[a]side from the fact that it constitutes a negotiated provision of a commercial lease between sophisticated parties, there [is] nothing exorbitant about such a provision calling for a 5% late fee.”[iv]

Ultimately, the District Court disagreed with the jurisdictional issue: “[T]his court can determine all issues in an expeditious manner,” wrote Judge Fairgrieve.  “The purpose of summary proceedings is to quickly resolve cases.”  The District Court then granted summary judgment to our client.

Citing the First Department’s Accurate Copy, the Court noted that a sophisticated party such as the law firm tenant in this case “had a meaningful choice to walk away and rent elsewhere.”  Accurate Copy had rejected an unconscionability claim on the grounds of the plaintiffs’ failure to allege and prove a lack of meaningful choice, as well as claims that electric charges were illegal on the basis that the plaintiffs did not allege failure by the landlord to enforce a lease’s electric charge provisions in conformance with their terms.  The Accurate Copy court declined to upset the commercial leases at issue in that case for the “purpose of alleviating a hard or oppressive bargain.”  Looking to this First Department case, this District Court within the Second Department agreed.

[i] Accurate Copy Service of America, Inc. v. Fisk Bldg., 72 A.D.3d 456, 899 N.Y.S.2d 157 (1^st Dep’t 2010) (quotation from Old Country Road Realty, LP v. Zisholtz & Zisholtz, LLP, 53 Misc.3d 1203(A), 2016 WL 5396005).

[ii] Zisholtz, supra. 

[iii] Zisholtz & Zisholtz, LLP, v. Old Country Road Realty, L.P., Nassau County Index No. 602616-16 (Murphy, J.), entered September 13, 2016.

[iv] Id. 

Clients embroiled in litigation are often very concerned with the overwhelming costs of discovery, especially when document production can involve sorting through thousands upon thousands of emails and other electronically stored documents to respond to the opposing party’s requests.  Generally speaking, litigants are responsible for their own discovery costs in litigation.  However, certain circumstances call for the shifting of those costs.  A recent decision out of the Commercial Division in Monroe County discussed the various factors courts will evaluate in determining whether to shift discovery costs to the party requesting the discovery.

Wade v. McConville, 53 Misc.3d 1216(A) (Sup. Monroe 2016) (J. Rosenbaum) dealt with legal malpractice claims in connection with Defendants’ representation of Plaintiff regarding a commercial transaction.  After the case was commenced, the parties exchanged significant discovery, including electronically stored information (“ESI”).  In connection with their production, Defendants produced their complete file regarding their representation of Plaintiff.  Following that production, Plaintiff requested that Defendants produce their “Case Management System Entries” as well as other electronic calendar entries, appointments, and other related entries.  After investigating the cost associated with having to produce this additional ESI, Defendants made a motion for a protective order conditioning the production of further ESI on Plaintiff’s payment of all costs associated with the production.

In its decision, the Court noted that, with the increasing prevalence of ESI, courts have been divided in determining when, if at all, to shift costs for discovery.  Despite the general rule that the producing party must typically bear its own costs in responding to discovery requests, the Court cited to a decision in Nassau County where it was determined that the requesting party should bear the entire cost for retrieving and producing discovery that includes ESI.  Lipco Elec. Corp. v. ASG Consulting Corp., 4 Misc.3d 1019(A)(Sup. Nassau 2004).  Notwithstanding the Lipco decision, many courts in New York follow the standard articulated in Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), a federal case holding that the producing party is initially responsible for the costs of searching, retrieving, and producing ESI unless the producing party can establish that a shift of the cost burden onto the requesting party is warranted.  To do so, the Court will evaluate: (1) the extent the request is tailored to discover relevant information; (2) the availability of the information from other sources; (3) the cost of production compared to the amount in controversy; (4) the cost of production compared to the party’s resources; (5) the relative ability of each party to control costs; (6) the importance of the issues in the litigation; and (7) the relative benefits to the parties obtaining the information.  Id.

In this case, the Court noted that despite Defendants’ claim that the production of the additional ESI would cost them $9,000, they did not provide a copy of the estimate/invoice or an affidavit from Defendants or an e-discovery vendor to substantiate this claim. Defendants also failed to analyze the Zubulake factors at all in requesting to shift costs to Plaintiff.  Given that the Court had already determined that the information sought by Plaintiff was relevant, Defendants had provided no support to obtain a protective order.  As such, the motion was denied.

Although Defendants in this case made a fairly poor attempt to shift the costs involved with the further production of ESI, the Court did provide some important findings as to what it would be looking for to support such a cost shift.  In particular, had Defendants actually provided a copy of the proposal indicating the costs involved with the ESI production and/or an affidavit from Defendants themselves or the electronic discovery vendor who estimated the costs, Defendants may have had a chance in this case.  The Court also noted it was important for Defendants to have analyzed the applicability of the Zubulake factors to the production of ESI, which they completely failed to do.  While the law regarding cost-shifting is continuing to evolve, it is important to be aware of how this very important tool can be utilized in litigation, either in your favor or to protect against it being used against you.

By Christine Malafi

When an insured seeks liability coverage under its general liability or commercial liability policy after it has been sued for personal injuries or death resulting from an accident, New York State Insurance Law § 3420(d) requires the insurance company to make its decision to disclaim liability or deny insurance benefits to the insured and provide “written notice as soon as is reasonably possible” to the insured and those persons making the claim. This obligation usually arises after the insured’s obligations under the applicable insurance policy have been triggered—one of which is the insured’s obligation to provide its insurance company with reasonable, timely notice of the claim in the first instance. So, if the insurance company doesn’t timely refuse to provide insurance coverage on the basis of late notice having been provided to it, that defense will be found to have been waived by the insurance company and unavailable to it in a subsequent suit seeking to force the insurer to provide coverage.

The New York State Court of Appeals recently reviewed these obligations in the context of a claim for coverage brought by a commercial business in connection with property damage suits against it based upon the alleged dumping of hazardous materials by the business, where the Insurance Law denial/disclaimer rules do not apply. The Court instead applied a common-law waiver and estoppel analysis and allowed the insurance company to assert the defense in the insured’s breach of contract action under the applicable insurance policies.

In Estee Lauder Inc. v. OneBeacon Ins. Group, LLC, 28 N.Y.3d 960 (2016), the highest Court in New York State found that the insurance company’s failure to assert an affirmative defense of late notice by the insured, after reviewing all factors, did not waive the defense to coverage in the subsequent suit brought by the insured. The Court found that the insurer in that case had raised late notice by the insured in “early communications” and that the “mere passage of time rather than . . . the insurer’s manifested intention to release a right . . . or on prejudice to the insured” was not a sufficient basis to find that the insurer was prevented from pointing to the insured’s late notice to avoid its coverage obligations.

Therefore, timely written notice of the late notice defense by the insurance company did not waive the potential complete defense to coverage. The insurance company was permitted to amend its Answer to include the defense, meaning, potentially, that the insured will not get the paid-for benefits of its insurance policy due to its late notice of the claim.

The lesson to be taken from this decision is that you must review your insurance policies and know when you are required to provide notice to your insurance company in order to protect your rights in the event of a lawsuit against you. At CMM, we are available to assist you in such a review to help you make sure that you don’t lose your insurance coverage for this reason.

“Let’s get Arthur’s take on it.”

“Arthur has a lot of experience with that.”

“See if Arthur has any suggestions before we finalize the documents.”

These phrases are heard daily in the offices of Campolo, Middleton & McCormick, LLP, where Arthur Yermash is a Senior Associate.  Throughout his tenure at the firm, Arthur has established himself as a talented attorney in the areas of Labor & Employment and Corporate law as well as a trusted resource for his colleagues.

Partners and associates alike would characterize Arthur as a “go-to person” in the office.  He has a unique depth of experience in a variety of complex legal issues.  Chances are, if a matter has a labor and employment or corporate law component, Arthur has come across it and has creative solutions to solve the problem.  He advises clients on compliance with federal, state, and local laws affecting the workplace including payment of wages, overtime, leave requirements, benefits, and hiring.  Arthur is often involved in drafting and negotiating employment-related documents such as employment agreements as well as non-competition, non-disclosure, severance, and option agreements.

Arthur’s practice also includes the representation of employers in wage and hour disputes, as well as defending against investigations by regulatory and government agencies including the New York and United States Departments of Labor, the New York State Attorney General’s Office, the Equal Employment Opportunity Commission, the New York Division of Human Rights, and the Occupational Safety and Health Administration.  His work includes implementing compliance programs and conducting internal investigations in connection with discrimination, compensation, overtime, and other employment issues.  Taking into consideration the unique nature of each employer and its industry, Arthur creates policies and procedures custom-tailored to the needs of the business.

In addition to his extensive employment practice, Arthur has drafted and negotiated hundreds of contracts for various business-related matters.  He has successfully represented and advised businesses in connection with high-value transactions across a variety of sectors.

Arthur’s dedication to his clients has helped countless startups evolve from idea to reality, entrepreneurs to expand their operations, shareholders to obtain maximum value from the sale of their businesses, and companies to establish critical internal policies that impact their bottom line.

Despite his many client obligations, Arthur takes the time to serve as a mentor to the young professionals at the firm.  Arthur was the firm’s first hire in 2006, when he came on board as an intern.  He is a graduate of Baruch College, CUNY (Macaulay Honors College) and Touro College, Jacob D. Fuchsberg Law Center.