Posted: March 16th, 2017
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.
Posted: February 27th, 2017
Published In: The Suffolk Lawyer
A crucial issue for any business named in a lawsuit or that is on notice that it will be named in a lawsuit is the preservation of evidence, specifically electronically stored information (“ESI”). Attorneys will typically send “litigation hold” letters to their own clients or opposing parties in litigation to ensure that all steps are taken to preserve all documents and ESI that could be relevant to the litigation. Essentially, businesses are instructed that nothing should be deleted, removed, modified, etc. by anyone within the company while the litigation is pending. When a client destroys evidence or is negligent in preserving evidence, it is considered “spoliation” of evidence and can lead to sanctions imposed by the Court against the party that is guilty of spoliation including, but not limited to, dismissal or striking of a pleading, monetary penalties, or a negative inference at trial. The negative inference at trial can be incredibly damaging to a party because it permits a jury to infer that any missing evidence is missing because it negatively impacted that party’s case or defense.
The Commercial Division in Queens County recently dealt with this spoliation of evidence issue in Ferrara Bros. Bldg. Materials Corp. & Best Concrete Mix Corp. (“Ferrara”) v. FMC Constr. LLC, et al. (Dufficy, J.). Plaintiff Ferrara commenced the lawsuit against FMC Construction LLC (“FMC”) and Casa Redimix Concrete Corp (“Casa”) claiming that Casa interfered with the contract Ferrara had with FMC to provide cement for a construction project. Casa’s defense was that it did not know about the contract between Ferrara and FMC at the time it entered into its contract with FMC. However, Ferrara alleged that Casa purposely backdated its contract with FMC to give the impression that it was entered into prior to Ferrara’s contract rather than after Casa’s principals became aware of Ferrara’s contract.
Given the issue with the timing of the contract between Casa and FMC, Ferrara sought in discovery (over seven years after the case had been commenced) the electronic data, specifically metadata that would reveal the true dates that the contract between Casa and FMC was prepared, modified, and executed. In response to the request, an IT specialist submitted an Affidavit on behalf of Casa claiming that two years after this litigation was commenced, the computers on which the native information was stored had been replaced and discarded due to a need to update Casa’s computer system. The Court made a point to note that this computer system replacement was not done through an automatic process but rather was a conscious decision by Casa to update its computer system in the midst of litigation.
As a result of the discarding of the information by Casa, Ferrara brought a motion seeking sanctions against Casa for spoliation of evidence. The Court noted that a party seeking sanctions based on spoliation of evidence must show the following: (1) the party having control over the evidence possessed an obligation to preserve it at the time of its destruction; (2) the evidence was destroyed with a “culpable state of mind”; and (3) the destroyed evidence was relevant to the party’s claim or defense such that the trier of fact could find that the evidence would support that claim or defense. VOOM HD Holdings LLC v EchoStar Satellite L.L.C., 93 AD3d 33, 45 (1st Dep’t 2012), quoting Zubulake v UBS Warburg LLC, 220 FRD 212, 220 (S.D.N.Y. 2003)
Considering that the timing of the contract between Casa and FMC was at the heart of Casa’s defense in the case regarding its knowledge of the contract between Ferrara and FMC, the Court found that the metadata Ferrara sought was relevant to the case. The Court also found that, considering that the parties were in the midst of litigation at the time and Casa knew or should have known that the ESI regarding its contract with FMC would be relevant to the litigation, Casa had an obligation to preserve this ESI. Lastly, the Court held that Casa had not presented any evidence to rebut the presumption that Casa was negligent and possibly even grossly negligent in failing to suspend its destruction of the computer system containing ESI relevant to the litigation. As such, the Court found that Ferrara had established the factors necessary to prove spoliation and turned to the issue of sanctions.
In reviewing sanctions to be imposed against Casa, the Court noted that spoliation sanctions are often based on the degree of willfulness with respect to the refusal or failure to disclose information which ought to have been disclosed. Hameroff & Sons, LLC v. Plank, LLC, 108 A.D.3d 908 (3d Dep’t 2013). Further, when the party seeking sanctions is still able to prove its case or defense, less severe sanctions are generally appropriate. De Los Santos v. Polanco, 21 A.D.3d 397, 398 (2d Dep’t 2005).
After reviewing the facts of this case and based on the fact that the Court believed that Ferrara could still prove its case even without the missing evidence, the Court determined that the appropriate sanction would be a negative inference at trial to the jury. Essentially, what this means is that if the case goes to trial, the jury will be permitted to infer that the reason the metadata was not disclosed is because it would act against Casa’s defense that it was unaware of Ferrara’s contract with FMC prior to its own contract with FMC.
The importance of preserving evidence in anticipation of litigation cannot be stressed enough. While it is entirely possible that Casa simply needed a computer system upgrade and did not realize it would be destroying evidence pertinent to the pending litigation, as seen here, courts will impose a duty on the business and its employees to have those holds in place to ensure that everything is preserved. The fact that Casa was already two years into the litigation at the time of the computer system replacement made the discarding of ESI even more egregious and should serve as an important lesson to business owners as well as attorneys counseling their clients at the start of and throughout litigation.
Posted: January 27th, 2017
On January 10, 2017, the U.S. Equal Employment Opportunity Commission requested public input on proposed enforcement guidance for addressing unlawful harassment in the workplace and hostile work environments under Title VII of the Civil Rights Act of 1964. Harassment claims have risen over the past few years and the proposed guidance follows a June 2016 EEOC report. While there are a number of classes protected under federal and state law, harassment claims based on sex, race, and/or disability appear to be most common. Employers should be aware of the legal standards and potential liability for unlawful harassment in order to help mitigate damages in advance.
As the Supreme Court explained in Harris v. Forklift Sys., Inc., 510 U.S. 17, 21-22 (1993):
Conduct that is not severe or pervasive enough to create an objectively hostile or abusive work environment – an environment that a reasonable person would find hostile or abusive – is beyond Title VII’s purview. Likewise, if the victim does not subjectively perceive the environment to be abusive, the conduct has not actually altered the conditions of the victim’s employment, and there is no Title VII violation.
The “severe or pervasive” standard seeks to find a middle ground between conduct that is juvenile or annoying and conduct that goes so far as to create a hostile work environment. Whether a person has been harassed depends on the “totality of the circumstances,” and a finding of harassment will turn on the specific facts of each case. Certain conduct is more blatant than other conduct, such as racial slurs or offensive comments about disabled persons. Other conduct may be more benign such as off-color jokes or distasteful insinuations but may nevertheless be a form of harassment when taken into the overall context.
Harassment must be based on a protected characteristic and can even be based on the perception that a person has a particular characteristic or belongs to a protected group, even if that perception is ultimately incorrect. Similarly, “associational discrimination” covers harassment against a person because of his or her association with individuals, such as a spouse, child, or close friend. Even if the alleged harasser belongs to the same protected class, harassment based on a protected characteristic may be found.
The liability standard on the employer depends on whether the harasser is the employer’s “alter ego” or “proxy,” a supervisor, or a non-supervisory employee, coworker, or non-employee. The burden of proof on an employee to simply file a discrimination or harassment complaint is virtually non-existent and federal and state agencies seem to accept blanket and conclusory allegations when accepting a charge. This turns the burden, along with the expense of properly defending a complaint, however frivolous, on the employer. For this reason, paper trails are important, and employee complaints along with disciplinary action and remedial measures should be properly documented and preserved to defend against all types of complaints.
The full text of the guidance is available at https://www.regulations.gov/document?D=EEOC-2016-0009-0001. The EEOC is accepting comments through Feb. 9, 2017: https://www.regulations.gov/docket?D=EEOC-2016-0009. If you have questions about how to protect your company and your employees from harassment in the workplace, please contact us.
Posted: December 20th, 2016
Published In: The Suffolk Lawyer
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 (1st 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.
Posted: December 20th, 2016
Published In: The Suffolk Lawyer
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.
Posted: November 28th, 2016
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.
Posted: November 18th, 2016
“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.
Posted: November 18th, 2016
After serving as County Executive of New York State’s largest suburban county—with a population of 1.5 million, a workforce of over 10,000 employees, and a budget of $2.7 billion—most people would be ready to slow down. But not if you’re Steve Levy.
Following his tenure as Suffolk County Executive (2004-2011), Steve joined Campolo, Middleton & McCormick, LLP, with offices in Ronkonkoma and Bridgehampton, in an Of Counsel role to focus on municipal, government relations, and real estate development work, as well as business development and strategy. Steve was a natural fit for the firm based upon their shared dedication to supporting the people and businesses that call Suffolk home.
Under Steve’s leadership, Suffolk County saw a record investment in open space preservation and alternative energies, an unprecedented commitment to workforce housing, the creation and preservation of over 15,000 jobs through economic development policies, and an over 20 percent reduction in overall crime. He kept county taxes under control while garnering seven consecutive bond rating increases.
Steve now puts the lessons he learned in his role as Suffolk County CEO to work for his clients, drawing from his own leadership experience to counsel clients on myriad business-related matters. He focuses on clients in the municipal, real estate, and corporate sectors.
In addition to his legal work, Steve serves as Executive Director of the Center for Cost Effective Government, a cadre of government-savvy community leaders dedicated to empowering the public to take steps to implement the solutions set forth by government reform think tanks. He is also the Founder and President of Common Sense Strategies, which helps government entities and private businesses slash operating costs and enhance efficiency.
A longtime public servant, Steve served in the Suffolk County Legislature and as a New York State Assemblyman prior to becoming County Executive. Steve’s dedication to improving our county guides all of his legal work, and uniquely qualifies him for a Leadership in Law Award.
Posted: October 26th, 2016
It’s a business owner’s worst nightmare: an employee leaves to work for a competitor, and tucked into the boxes in which he’s packing his diplomas and photos are your customer lists and confidential information.
Enter a non-compete agreement, which prohibits the employee from working for a rival company for a specified amount of time after leaving your employ. Traditionally, employers have used non-compete agreements as tools to protect their interests with respect to high-level employees with specific skills and those with access to highly valuable information such as trade secrets and customer lists. But if the New York Attorney General’s recent string of investigations into non-competes is any indication, more and more employers are requiring low-wage, unskilled workers to sign on the dotted line.
In New York, enforceability of non-compete agreements has historically been a highly litigated area of the law. Courts will enforce only those non-compete agreements where the person received something of value (consideration) for the obligation and where the agreements are narrowly tailored and reasonable in terms of the length of time, geographic scope, restricted activities, and employer’s industry. The focus of a non-compete should always be to protect the business and not to unnecessarily and unreasonably restrict an employee. If a judge believes the agreement stands in the way of an employee being able to find a new job and support herself, it is unlikely to be enforced.
Against this backdrop of non-compete enforceability, the office of New York Attorney General Eric Schneiderman announced settlements this summer with several companies whose non-compete agreements were determined to be overly broad. One such settlement was with Law360, a legal news outlet, which had been requiring editorial employees at all levels to sign non-competes prohibiting them from working for the company’s direct competitors for a year after leaving the company. The settlement agreement does away with these mandatory non-competes, leaving in place those for only the most senior editorial employees deemed to have highly specialized skills.
With more investigations and settlements expected from the AG’s office regarding overly broad non-compete agreements, New York employers should take this opportunity to review their existing non-compete agreements and take stock of their hiring policies regarding such agreements.
Specifically, employers should considering doing away with blanket policies requiring all employees, regardless of skill and pay level, to sign non-competes. Instead, they should evaluate employees individually, assessing their access to proprietary information, whether they possess highly specialized skills critical to the role, and whether there is a legitimate and reasonable business interest in barring the employee from working for a competing company after he or she departs. If a non-compete agreement is in fact warranted, it should be narrowly tailored to maximize its enforceability.
Please contact us for assistance in reviewing your non-compete agreements or with any questions.
