United States: New York Court Of Appeals Round-Up & Preview (September 2019)

The New York Court of Appeals Round-Up & Preview summarizes key opinions in civil cases issued by the Court over the past year and highlights a number of civil cases of potentially broad significance that the Court will hear during the coming year, beginning in September 2019. The cases are organized by subject.

I. Administrative and Constitutional Law

In the past year, the Court decided major cases involving issues of administrative and constitutional law, including a Privilege and Immunities Clause challenge to the CPLR's security provisions for nonresident litigants, a Boreali challenge to Department of Health restrictions on non-healthcare expenses by healthcare providers, and a decision delineating the scope of taxable real property under the Real Property Tax Law in the context of telecommunications equipment.

a. Clement v. Durban (32 N.Y.3d 337; November 14, 2018)

In a unanimous decision (Feinman, J.), the Court held that CPLR 8501(a) and 8503, New York's longstanding security provisions which treat resident and nonresident litigants differently, do not violate the Privileges and Immunities Clause of the United States Constitution. Plaintiff, a former New York resident who had relocated to Georgia, argued that CPLR 8501(a) and 8503, which required her to post a minimum of $500 security for costs in the event she lost the case, violated the Privileges and Immunities Clause. The Court explained that a two-step inquiry governs Privileges and Immunities Clause challenges to statutes providing for disparate treatment on the basis of residency: first, a court must decide whether the statute burdens privileges and immunities protected by the Clause; second, if a plaintiff's exercise of a fundamental right has been impaired, the burden shifts to the defendants, who must show that the restriction is closely related to the advancement of a substantial state interest. Applying that framework to plaintiff's challenge, the Court held the statutes "do not unduly burden nonresidents' fundamental right to access the courts because they impose marginal, recoverable security for costs on only those nonresident plaintiffs who do not qualify for poor persons' status" or for any other statutory exemption. Because plaintiff failed to make an initial showing that the security provisions impaired her fundamental right of access to the courts, the Court declined to decide whether those provisions were closely related to the advancement of a substantial state interest."

b. Expressions Hair Design v. Schneiderman (32 N.Y.3d 382; October 23, 2018)

In a case presenting a question certified by the United States Court of Appeals for the Second Circuit, the majority (Fahey, J., joined by DiFiore, C.J., and Stein and Feinman, J.J.) held that a merchant complies with New York's General Business Law § 518—which provides that "[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means"—"if and only if the merchant posts the total-dollars-and-cents price charged to credit card users." Plaintiffs, five merchants, wished to employ a "single-sticker" regime in which cash prices would be listed in dollar and cents amounts and a surcharge for credit cards would be identified without separately listing the total credit card price. Plaintiffs filed suit in federal court, alleging that, inter alia, General Business Law § 518 violated their First Amendment rights. Neither plaintiffs nor defendants contended that the statute prohibited differential pricing. On appeal, the U.S. Supreme Court held that Section 518's prohibition of a single-sticker regime implicated the First Amendment and remanded to the United States Court of Appeals for the Second Circuit to decide which standard to apply in determining whether Section 518 constitutes an unconstitutional restraint on speech. The Second Circuit certified to the Court of Appeals the question of whether a merchant complies with Section 518 so long as the merchant posts the total-dollars-and-cents price. The majority answered that question in the affirmative and further clarified that Section 518 prohibits plaintiffs' proffered single-sticker scheme. In separate opinions, Judge Rivera concurred with the result; Judge Wilson concurred in part and dissented in part; and Judge Garcia dissented on the grounds that General Business Law § 518 is not a disclosure statute but rather a statute that prohibits merchants from imposing any credit card surcharge at all.

c. International Union of Painters & Allied Trades, District Council, No. 4 v. N.Y. State Department of Labor (32 N.Y.3d 198; October 18, 2018)

In a 6-1 decision (Fahey, J., joined by DiFiore, C.J., and Rivera, Stein, Wilson, and Feinman, J.J.), the Court upheld the Department of Labor's determination that Labor Law § 220(3-e) limits the payment of apprentice wages on public work projects to "apprentices who are performing tasks that are within the respective trade classifications of the approved apprenticeship programs in which they are enrolled." Several labor organizations that ran a glazier apprenticeship program challenged the agency's interpretation, which required the organizations to pay their apprentices prevailing wage rates for performing certain non-glazier tasks, such as ironworking. After finding that the text of the statute was ambiguous, the Court deferred to the agency's interpretation, reasoning that it aligned with the law's aim of preventing employers from "cutting standards of construction work by hiring an excessive number of unskilled employees, and [ensuring] that learning-level workers receive approved, supervised training." Judge Garcia dissented, arguing that the agency's interpretation conflicted with the statute's plain meaning.

d. LeadingAge N.Y., Inc. v. Shah (32 N.Y.3d 249; October 18, 2018)

The majority (DiFiore, C.J., joined by Steinman, Fahey, and Feinman, J.J.) upheld a Department of Health regulation restricting the use by certain health care providers of state funds for non-healthcare expenses and struck another regulation limiting certain executive compensation. The first regulation set a "hard cap" on the percentage of state funds that certain health care providers could use on administrative costs and executive compensation. The second regulation imposed a "soft cap," limiting executive compensation to $199,000 from all sources, including non-taxpayer funds. Applying the four-factor test set out in Boreali v Axelrod, 71 N.Y.2d 1 (1987), the Court upheld the hard cap, explaining that "[t]he legislature expressed a policy goal—that state health care funds should be expended in the most efficient and effective manner to maximize the quality and availability of public care—and the hard cap regulations, which focus exclusively on the appropriate use of state funds, are directly tied to that goal without improperly subverting it in favor of unrelated public policy interests." The Court also upheld the hard cap under arbitrary-and-capricious review. The Court struck down the soft cap on executive compensation, however, reasoning it violated the separation of powers doctrine because, unlike the hard cap, it "pursu[ed] a policy consideration—limited executive compensation—that is not clearly connected to the objectives outlined by the Legislature." Instead, the soft cap "represents a distinct 'value judgment,'" which pursued "the goal of limiting executive compensation as a matter of public policy" but was "not sufficiently tethered to the enabling legislation" identified by the agency. Judge Garcia concurred in part but would have struck down the hard cap on executive compensation as well, on the basis that it represented impermissible "social policymaking" by the agency not aligned with legislative goals. Judge Wilson, joined in part by Judge Rivera, would have upheld the soft cap, arguing that it promoted the same goals as the hard cap, as well as the legislative policy of "ensuring the State does business only with responsible contractors."

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