New York Law Review

Tag: intervention

  • Kasowitz, Benson, Torres & Friedman, LLP v JPMorgan Chase Bank, N.A., 2024 NY Slip Op 05876: Non-Party’s Right to Challenge a Judgment Affecting Their Interests

    2024 NY Slip Op 05876

    A non-party lienholder to an action is not collaterally estopped from challenging the legal basis of a judgment in a separate proceeding if they were not joined in the original action and their interests were not adequately represented.

    Summary

    The New York Court of Appeals addressed whether a lienholder, JPMorgan Chase Bank, N.A. (“Chase”), could challenge a fee award against a debtor in a separate proceeding. The court held that Chase was not barred from challenging the judgment, despite its awareness of the initial action, because it was not joined in the original action and its interests were not adequately represented by the debtor. The Court emphasized that collateral estoppel requires a “full and fair opportunity to litigate” and that intervention is permissive, not mandatory, under the CPLR. This decision clarifies the rights of non-parties in subsequent proceedings where a judgment affects their interests.

    Facts

    Alphonse Fletcher, Jr. acquired property in a cooperative corporation controlled by The Dakota, Inc. The Dakota held a lien on the property. Chase approved a loan to Fletcher secured by an assignment of Fletcher’s rights in the property, and the parties entered into an agreement recognizing The Dakota’s priority. Fletcher sued The Dakota for discrimination, and The Dakota counterclaimed for legal fees based on a lease provision. The trial court granted The Dakota summary judgment on the counterclaim, awarding attorneys’ fees. Kasowitz, Benson, Torres & Friedman, LLP commenced a CPLR 5225 proceeding against Chase to seize Fletcher’s property to satisfy a judgment against Fletcher for unpaid legal fees. The Dakota intervened, claiming a superior interest arising from the fee judgment. Chase challenged the fee award. The Appellate Division affirmed a lower court decision that Chase was collaterally estopped from challenging the fee award.

    Procedural History

    The Supreme Court granted summary judgment to The Dakota in the Fletcher action. The Appellate Division affirmed. Chase moved for leave to appeal to the Court of Appeals and moved to intervene and vacate the judgment in the Fletcher action. The Supreme Court denied Chase’s motion. The Court of Appeals granted Chase leave to appeal. The Court of Appeals reversed the Appellate Division’s ruling that Chase was collaterally estopped from contesting the fee award and remitted the case for further proceedings.

    Issue(s)

    1. Whether Chase, a non-party lienholder, is collaterally estopped from challenging the legal basis of a fee judgment entered against the debtor in a separate proceeding.

    2. Whether Chase was required to intervene in the initial action to protect its interests in the property.

    Holding

    1. No, because Chase was not a party in the initial action and did not have a full and fair opportunity to litigate the fee award, it is not collaterally estopped from challenging the fee judgment.

    2. No, Chase was not required to intervene in the prior action.

    Court’s Reasoning

    The Court of Appeals reasoned that collateral estoppel did not apply because Chase was not a party to the original action and had not had its rights previously litigated. The court cited the principle that an assignee cannot be bound by actions against an assignor where the succession of rights occurred before the suit against the assignor was initiated. The court found that the 2008 agreement bound Chase to The Dakota regarding creditor priority but did not prevent Chase from challenging The Dakota’s entitlement to the fee award. The Court also emphasized that, under the CPLR, intervention is permissive. The court further cited U.S. Supreme Court precedent to find that due process required that the interests of Chase and Fletcher had to be aligned, and that either Fletcher acted in a representative capacity for Chase, or the court took care to protect Chase’s interests, none of which occurred here.

    The court concluded that Chase did not have a full and fair opportunity to litigate the issue of the fee award in the original action. The Court rejected The Dakota’s argument that Chase was collaterally estopped. The Court also noted that requiring Chase to intervene would violate due process.

    Practical Implications

    This ruling reinforces that non-parties are generally not bound by judgments in cases to which they were not joined, even if they have knowledge of the proceedings. Lawyers should advise clients with security interests to consider joining actions that may affect their interests, as the court found that intervention is permissive, not mandatory. Further, mere notice of a prior suit is insufficient to bind a non-party; the non-party’s interests must have been adequately represented. This case clarifies the limits of collateral estoppel and intervention in New York and should guide attorneys in assessing when and how to protect the interests of non-parties in litigation.

  • People v. Combest, 4 N.Y.3d 859 (2005): Intervention by Non-Parties in Criminal Appeals

    4 N.Y.3d 859 (2005)

    A non-party cannot intervene in a criminal appeal; their recourse is to seek leave to appear as amicus curiae.

    Summary

    This case addresses whether a non-party, Hybrid Films, Inc., could intervene in a criminal appeal involving James Combest. Hybrid Films argued that it had a direct interest in the appeal’s outcome and lacked notice of the proceedings. The Court of Appeals held that the Criminal Procedure Law does not allow for non-party intervention in criminal cases. The court noted that Hybrid’s appropriate avenue would have been to seek amicus curiae status. Further, the court stated that Hybrid’s arguments regarding journalist privilege had already been raised and considered.

    Facts

    James Combest was the defendant in a criminal case. Hybrid Films, Inc., a non-party, claimed to have a direct interest in the outcome of Combest’s criminal appeal. Hybrid Films alleged it did not receive notice of the appeal.

    Procedural History

    Hybrid Films moved to intervene in the criminal appeal and sought reargument. The Court of Appeals considered Hybrid Films’ motion to intervene and for reargument.

    Issue(s)

    Whether a non-party can intervene in a criminal appeal under New York Criminal Procedure Law.

    Holding

    No, because the Criminal Procedure Law does not provide a mechanism for a non-party to intervene in or be joined in a criminal case.

    Court’s Reasoning

    The Court of Appeals reasoned that the Criminal Procedure Law lacks any provision allowing a non-party to intervene in a criminal case. The court emphasized that a non-party’s proper course of action is to request permission to appear as amicus curiae, which allows them to supplement arguments on legal issues. The court further stated that in this case, the filing setting forth issues under consideration was available to the public and published, together with a solicitation for amici, in the New York Law Journal, giving Hybrid Films notice and opportunity to participate. Even so, the court noted that Hybrid’s arguments regarding journalist privilege were already advanced by the People and that their affidavits and memoranda of law had been considered. The court concluded that because Hybrid had no right to intervene, its motion for reargument was dismissed on the ground that Hybrid was not a party to the appeal.

  • Greater New York Health Care Facilities Association, Inc. v. DeBuono, 91 N.Y.2d 716 (1998): Relation Back Doctrine and Intervention in Article 78 Proceedings

    Greater N.Y. Health Care Facilities Assn., Inc. v. DeBuono, 91 N.Y.2d 716 (1998)

    In Article 78 proceedings, a proposed intervenor’s claim can only relate back to the original petition’s filing date if both claims stem from the same transaction or occurrence, and the original petitioner’s claim provided the respondent with sufficient notice of the intervenor’s specific claim to avoid prejudice.

    Summary

    This case addresses whether proposed intervenors in an Article 78 proceeding can relate their claims back to the original petition’s filing date, thus avoiding a statute of limitations bar. The New York Court of Appeals held that relation back is permissible only if the intervenor’s claim and the original petitioner’s claim are based on the same transaction or occurrence and the original claim gave the respondent notice of the intervenor’s specific claim, preventing prejudice. Because the proposed intervenors’ claims were not closely related to the original petitioners’ and would increase the respondents’ liability, the Court denied intervention.

    Facts

    An association of nursing homes and eight individual nursing homes (petitioners) initiated an Article 78 proceeding challenging regulations by the Department of Health that established Medicaid reimbursement rates. The petition purported to be on behalf of all similarly situated residential health care facilities, but no class certification was sought. Eight other nursing homes (proposed intervenors), not members of the association, sought to intervene after discovering they wouldn’t be included in a settlement between the original petitioners and the respondents, claiming they were misled by the petition’s caption. These proposed intervenors’ claims were time-barred if not related back to the original filing date.

    Procedural History

    Supreme Court initially granted the motion to intervene, deeming the claims not time-barred due to relation back. On reargument, the court upheld intervention, finding the claims similar and no prejudice to the respondents. The Appellate Division reversed, holding the claims were time-barred and did not relate back under CPLR 203(f) because they exposed respondents to additional liability from unrelated claimants. The Appellate Division then certified the question to the Court of Appeals.

    Issue(s)

    Whether the claims of proposed intervenors in an Article 78 proceeding may be related back to the filing date of the original petition, where the proposed intervenors are unrelated to the petitioners, but similarly aggrieved by the challenged administrative action, and their claims would expose respondents to additional liability.

    Holding

    No, because the proposed intervenors’ claims were not based on the same transaction or occurrence as the original petitioners’ claims, and the original petitioners’ claims did not provide sufficient notice of the proposed intervenors’ specific claims to avoid prejudice to the respondents.

    Court’s Reasoning

    The Court of Appeals acknowledged that CPLR 7802(d) grants courts broader authority to allow intervention in Article 78 proceedings. However, intervention cannot revive stale claims. Relation back is permissible only if the proposed intervenor’s claim and the original petitioner’s claim are based on the same transaction or occurrence, and the original petitioner’s claim would have given the respondent notice of the proposed intervenor’s specific claim, so that the imposition of the additional claim would not prejudice the respondent.

    The Court found that the petitioners and proposed intervenors were not closely related, and their claims, though similarly aggrieved by the regulations, were based on different transactions because each nursing home has an individualized reimbursement rate. The court emphasized that respondents had no notice of proposed intervenors’ particularized claims and that allowing intervention would expose respondents to additional liability from separate claimants whose claims were otherwise time-barred.

    The Court rejected the argument that the inquiry in an article 78 proceeding should be limited to the interest of the intervening party because doing so would undermine the four-month statute of limitations: “[T]he relatively short limitation period ‘requires those subject to regulatory decisions such as Medicaid rate-making to bring their challenges promptly’ in order to facilitate rational planning by all concerned parties.” The Court reasoned that a contrary holding would allow a single nursing home’s litigation to preserve the rights of all nursing homes throughout the state despite the expiration of the limitations period.

    Finally, the court stated that relying on the mere caption of the proceeding without inquiring into the status of the matter does not excuse the failure to protect their own interests.

  • Vantage Petroleum, Bay Isle Oil Co. v. Board of Assessment Review, 61 N.Y.2d 695 (1984): Intervention in Tax Certiorari Proceedings

    Vantage Petroleum, Bay Isle Oil Co. v. Board of Assessment Review, 61 N.Y.2d 695 (1984)

    A board of education’s right to intervene in a tax certiorari proceeding concerning property within its district depends on whether it can demonstrate it will be bound by the judgment’s res judicata effect.

    Summary

    This case addresses whether a board of education in Suffolk County can intervene in a tax certiorari proceeding affecting property within its district. The Court of Appeals held that the lower courts’ discretionary decision regarding intervention by permission was not reviewable absent an abuse of discretion. As for intervention as a matter of right, the court affirmed the Appellate Division’s decision, emphasizing that the board’s ability to intervene hinges on whether the judgment in the tax certiorari proceeding would have a res judicata effect on the board. The court clarified that while a judgment fixing property value for one year can be evidence in subsequent years, it doesn’t automatically establish res judicata.

    Facts

    A tax certiorari proceeding was initiated concerning a property located within a school district in Suffolk County. The Board of Education for that district sought to intervene in the proceeding, arguing that the outcome of the tax assessment would directly impact the school district’s funding. The Board sought intervention both by permission and as a matter of right.

    Procedural History

    The lower courts considered the Board of Education’s application for intervention. The Appellate Division affirmed the denial of intervention. The Court of Appeals then reviewed the Appellate Division’s order.

    Issue(s)

    1. Whether the lower courts abused their discretion in denying the Board of Education’s application for permissive intervention under CPLR 1013?
    2. Whether the Board of Education has a right to intervene in the tax certiorari proceeding under CPLR 1012(a)(2)?

    Holding

    1. No, because absent an abuse of discretion as a matter of law, the lower courts’ exercise of discretion is not reviewable by the Court of Appeals.
    2. No, because the Board of Education’s right to intervene depends on whether it would be bound by the judgment’s res judicata effect, which is not automatically established in subsequent tax years.

    Court’s Reasoning

    The Court of Appeals addressed the two grounds for intervention separately. Regarding permissive intervention under CPLR 1013, the court noted its limited scope of review, stating that it could only intervene if the lower courts had abused their discretion as a matter of law, which was not demonstrated in this case. As for intervention as a matter of right under CPLR 1012(a)(2), the court agreed with the Appellate Division’s reasoning. The core issue was whether the Board of Education would be bound by the judgment in the tax certiorari proceeding. The court clarified that being “bound by the judgment” hinges on res judicata. The court cited Matter of Unitarian Universalist Church v Shorten, 64 Misc 2d 851, 854, to support the principle that res judicata effect determines whether a movant is “bound by the judgment.” The court also emphasized that while a prior judgment fixing property value can be evidence in later tax years, it doesn’t automatically create res judicata. As the court stated, “a judgment fixing the value of property for taxation in one year may be evidence of its assessed value for a succeeding year but is not res judicata (Matter of Woolworth Co. v Tax Comm., 20 NY2d 561, 567; People ex rel. Hilton v Fahrenkopf, 279 NY 49, 52-53).” Because the Board of Education’s res judicata argument was not sufficiently established, the court affirmed the denial of intervention as a matter of right.

  • Matter of Village of Brockport v. New York State Liquor Authority, 26 N.Y.2d 5 (1970): Scope of Village Intervention in Liquor License Hearings

    Matter of Village of Brockport v. New York State Liquor Authority, 26 N.Y.2d 5 (1970)

    While villages have the right to seek judicial review of liquor license grants under Alcoholic Beverage Control Law § 123, this right does not automatically imply the right to intervene fully in the State Liquor Authority’s license hearings; the extent of village participation in such hearings is generally at the agency’s discretion.

    Summary

    The Village of Brockport sought to intervene fully in a State Liquor Authority (SLA) hearing regarding a liquor license application. When the SLA limited the village’s participation, the village sought judicial review, arguing that its limited involvement constituted an illegality in the licensing process. The Court of Appeals held that while villages have the right to seek judicial review of liquor license grants under Alcoholic Beverage Control Law § 123, this right does not guarantee them full intervention in SLA hearings. The decision to allow or deny intervention rests within the agency’s discretion.

    Facts

    An application for a liquor license was filed with the State Liquor Authority (SLA). The Village of Brockport attempted to fully participate in the SLA hearing concerning the application. The SLA restricted the extent of the Village’s participation during the hearing process.

    Procedural History

    The Village of Brockport sought judicial review of the SLA’s decision to limit their participation in the liquor license hearing. The Appellate Division remitted the matter to the Authority for a new hearing. The Court of Appeals reversed the Appellate Division’s order and remitted the case back to the Appellate Division to determine the appropriate action, holding that the SLA had the discretion to limit the village’s participation.

    Issue(s)

    Whether a village has a statutory right to intervene fully in liquor license hearings held by the State Liquor Authority pursuant to section 54(3) of the Alcoholic Beverage Control Law.

    Holding

    No, because there is no statutory provision expressly granting villages the right to intervene fully in liquor license hearings; the allowance or denial of applications to intervene in administrative proceedings rests in the discretion of the agency.

    Court’s Reasoning

    The Court of Appeals reasoned that while villages have the right to seek judicial review of the grant of a license under section 123 of the Alcoholic Beverage Control Law, this right does not automatically grant them the right to intervene in the underlying agency proceedings. The court noted that the decision to allow or deny intervention in administrative proceedings is generally within the agency’s discretion. The court stated, “Generally, allowance or denial of applications to intervene in administrative proceedings rests in the discretion of the agency.” The court acknowledged that allowing the village to participate fully might have been preferable, but the agency was still within its rights to limit the village’s participation. The court also emphasized that proceedings under section 123 are typically brought to review whether there is sufficient basis for the Authority to grant a liquor license. Since the Appellate Division didn’t determine whether a proper basis for the license grant existed, and the village’s sole claim was the denial of full participation, the Court of Appeals remitted the case for further action consistent with its ruling that full participation was not required.

  • White Plains Savings Bank v. Sam and Al Realty Co., Inc., 26 N.Y.2d 20 (1970): Intervention by Creditors in Foreclosure

    White Plains Savings Bank v. Sam and Al Realty Co., Inc., 26 N.Y.2d 20 (1970)

    A judgment creditor of a grantor who allegedly fraudulently conveyed property to the holder of the equity of redemption has a sufficient interest to intervene in a mortgage foreclosure action involving that property, especially when the referee makes unauthorized payments affecting potential surplus funds.

    Summary

    Nesmith, a judgment creditor of Sam and A1 Realty Co., Inc., and Vucker, a holder of a promissory note from the same company, sought to intervene in a mortgage foreclosure action. They alleged that Sam and A1 Realty fraudulently conveyed the property to White Plains Realty Co., Inc., rendering Sam and A1 Realty judgment proof. The referee in the foreclosure action paid taxes from the sale proceeds, contrary to the foreclosure judgment stating the sale would be “subject to unpaid taxes.” Nesmith and Vucker argued this payment reduced surplus funds they could potentially claim. The lower courts denied their motion to intervene, deeming their interest too remote. The Court of Appeals reversed, holding that the creditors had a sufficient interest to intervene, especially given the referee’s unauthorized payment.

    Facts

    Sam and A1 Realty Co., Inc. conveyed real property to White Plains Realty Co., Inc., a newly formed corporation. Nesmith was a judgment creditor of Sam and A1 Realty, and Vucker held a promissory note from them. Nesmith and Vucker claimed the conveyance was fraudulent, rendering Sam and A1 Realty judgment proof. White Plains Savings Bank initiated a mortgage foreclosure action on the property now held by White Plains Realty. The foreclosure judgment ordered the referee to sell the property “subject to unpaid taxes.” After the sale, the referee paid the mortgage claim and other costs, then used the remaining funds to pay taxes and tax liens against the property.

    Procedural History

    The plaintiff moved to confirm the referee’s report of sale. Nesmith and Vucker moved to intervene, opposing the motion on the grounds that the referee wrongfully paid taxes contrary to the foreclosure judgment. Special Term denied the motion to intervene, stating it lacked the power to permit intervention because the applicants were not direct creditors of the record holder of the equity of redemption, and the holder did not object. The Appellate Division affirmed, holding the appellants’ interest was too remote. The Court of Appeals granted leave to appeal and certified the question of whether the Appellate Division’s order was correctly made.

    Issue(s)

    Whether the interest of judgment creditors of a grantor who allegedly fraudulently conveyed property to the holder of the equity of redemption is too remote to allow them to intervene in a mortgage foreclosure action involving that property.

    Holding

    No, because the judgment creditors have a sufficient interest in potential surplus funds resulting from the sale, especially when the referee makes unauthorized payments that could affect the amount of those funds.

    Court’s Reasoning

    The Court of Appeals relied on Goodell v. Harrington, 76 N.Y. 547 (1879), which held that a judgment creditor of the equity holder’s grantor could intervene in a similar situation. The Court reasoned that because the property constituted a fund from which the intervenor might satisfy his judgment if he prevailed on the fraudulent conveyance claim, the interest was sufficient. The Court found the present case analogous to Goodell, stating, “The intervenor in both cases is a creditor of the person who has conveyed the subject property, allegedly by a fraudulent conveyance, to the holder of the equity of redemption.” The Court emphasized that the referee’s payment of taxes, contrary to the foreclosure judgment, was an act beyond his power. This unauthorized payment directly affected the potential surplus money to which the creditors might have a claim. The Court concluded that the lower courts erred in holding they lacked the power to allow intervention, and reversed the order confirming the referee’s report. The court emphasized that the property represented a potential fund for satisfying the creditors’ claims, making their interest direct and substantial enough to warrant intervention.