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New York

New York’s race to the bottom (or the top) of the Judicial Hellholes® list continued in 2021, as the state’s leadership seems intent on creating the worst legal climate in the nation. The gap between California and New York is narrow, as the two jurisdictions battle it out for the most “no-injury” class action lawsuits targeting the food and beverage industry and the most claims under the Americans with Disabilities Act. The two states also have activist attorneys general trying to regulate industries through litigation.

Rather than address the overwhelming need for liability protections for workers and businesses on the frontline of the pandemic, the state legislature pursued a liability-expanding agenda.

   

RECORD NUMBER OF FOOD LAWSUIT FILINGS FLOOD COURTS

This year, New York is on pace to break the 2020 record of 183 consumer class action filings. In 2020, more food-related lawsuits pervaded New York courts than the next four states combined. According to the New York Civil Justice Institute, consumer class actions in New York tripled between 2017 and 2020, largely due to food and beverage lawsuits, which accounted for approximately 60% of such claims in 2020. Through June 30, 2021, 77 food marketing class actions were filed in New York.

Plaintiffs’ lawyers regularly abuse the vague language of New York’s consumer protection law (GBL §349), which does not require a plaintiff to demonstrate that the business intentionally misled consumers or that a consumer actually relied on the misrepresentation to her detriment. Although a plaintiff must demonstrate that a practice is “likely to mislead a reasonable consumer acting reasonably under the circumstances,” many New York courts have refused to assume that a reasonable consumer consults a nutrition label.

The plaintiff may recover actual damages or $50, whichever is greater, and courts may triple actual damages up to $1,000 if the defendant knowingly or willfully engaged in the deceptive act.

In June 2021, the New York Court of Appeals expanded the application of the state’s consumer protection law to a business setting. The high court held that directing conduct to a “subclass of consumers” is sufficient to satisfy the statutory requirement that a defendant’s conduct was consumer-oriented, because the defendant’s conduct was not limited to “a private contract dispute, unique to the parties.” In other words, a defendant’s conduct does not need to be directed at all members of the public to satisfy the first element of the law.

Previous precedent defined consumers as those “who purchase goods and services for personal, family, or household use,” but in this case, defendants sold an annual treatise on New York tenant law, a book meant for business use. According to the state’s high court, it is immaterial that the conduct was only directed to legal professionals because “GBL §349 is focused on the seller’s deception and its subsequent impact on consumer decision-making, not on the consumer’s ultimate use of the product.” Thus, GBL §349 applies to products used exclusively in a business setting, not just products used for personal or household use.

Worse yet, the legislature is considering a bill that would encourage even more frivolous consumer protection lawsuits. A. 2495A/S. 6414 expands the consumer protection law to prohibit not only “deceptive” acts, but also “unfair” or “abusive” acts, increases the minimum statutory damages from $50 to $2,000 and permits unconnected third-party organizers to sue for the alleged harm, even if the alleged violation is not consumer oriented.

“Vanilla Vigilante” Finds New Targets

Infamous Long Island attorney Spencer Sheehan, also known as the “Vanilla Vigilante,” continues to prolifically file lawsuits specializing in product flavoring. Sheehan filed half of the state’s consumer class action lawsuits in 2019 and almost two thirds in 2020.

2021 has been no different. In January, he filed a lawsuit on account of 7-Eleven’s marketing of “Yumions.” According to Sheehan, the bag features a depiction of a green onion, but the snack only contains onion powder, which does not provide the same health benefits as real onions. The complaint stated: “Since each part of the onion – bulb, root, stem, and skin – has unique flavor and aroma compounds, onion powder necessarily is unable to provide the ‘oniony’ flavor appreciated by consumers.”

He also filed another suit on account of Whole Foods’ marketing of “Lemon Raspberry Italian Sparkling Mineral Water,” which the lawsuit claims misleads consumers into believing that the product contains an appreciable amount of lemon and raspberry. This lawsuit was voluntarily dismissed in August 2021.

In April 2021, Sheehan & Associates reached a settlement with Blue Diamond on behalf of a proposed class of consumers who purchased Almond Breeze vanilla-flavored products. The settlement, valued at approximately $2.6 million, awards cash payments of up to $1 per item with proof of purchase, and $0.50 per item without proof of purchase. Plaintiffs’ lawyers could receive as much as $550,000 for fees and costs, while the named plaintiffs would share $25,000.

In October 2021, Sheehan targeted Pop-Tarts’ classic strawberry toaster pastry. The plaintiff sought $5 million, claiming that the company’s marketing of its strawberry pop-tart deceived consumers because the pastry contains higher quantities of pears and apples than strawberries.

Good News

In June 2021, U.S. District Judge Raymond J. Dearie dismissed a consolidated proposed class action brought by Sheehan against Mars Wrigley. Plaintiffs alleged that Mars Wrigley violated New York’s consumer protection laws by marketing its vanilla-flavored ice cream bars as “vanilla” because consumers are misled to believe that the product is flavored exclusively by vanilla beans. Judge Dearie found that plaintiffs failed to demonstrate that “a reasonable consumer acting reasonably under the circumstances would be misled by the phrase ‘vanilla ice cream’” because “[t]his case, like the litany of vanilla cases before it, is about flavor and there is no allegation that the ice cream bars do not taste like vanilla.”

Since mid-2019, Sheehan & Associates P.C. has filed virtually identical complaints against, and forced quick settlements with, Nestle, Friendly’s, Blue Diamond, Califia, Trader Joe’s, and others.

NEW YORK LEADS THE WAY WITH ADA WEBSITE ACCESSIBILITY ABUSE – BUT RELIEF MAY BE NEAR

New York led the nation in federal Americans with Disabilities Act (ADA) Title III website accessibility filings with 1,694 in 2020. The runner up, Florida, only produced 302 lawsuits. Three New York firms filed a vast majority of the cases – Cohen & Mizrahi LLP, Gottlieb and Associates, and Mard Khaimov Law, PLLC. These law firms represent serial plaintiffs in hundreds of lawsuits. For example, in June 2021, Cohen & Mizrahi filed nine lawsuits in one day on behalf of a single plaintiff.

New York’s surge in ADA Title III cases stems from two 2017 decisions, Andrews v. Blick Art Materials, LLC and Marett v. Five Guys Enterprises LLC, in which two New York federal judges found that websites are subject to the ADA. However, in August of 2021, New York District Judge Eric Komitee dismissed a case against Newsday claiming that the newspaper company violated ADA Title III by failing to provide closed captioning for videos on its website. Departing from previous New York district court decisions, Judge Komitee concluded that websites are not covered by ADA Title III because the history and plain language of the statute confine the term “public accommodation” to physical spaces. This ruling has the potential to inspire other judges across the state and stem the tide of frivolous accessibility claims that congest New York courts and harm small businesses.

More Good News

In June 2021, Judge Brenda Sannes of the U.S. District Court for the Northern District of New York dismissed 17 of plaintiff Deborah Laufer’s ADA cases against various hotels across the state for lack of standing. A self-proclaimed “tester,” Laufer contends that she advocates for disabled people by bringing civil rights claims against businesses that allegedly fail to comply with ADA regulations. Here, she claimed that numerous hotels failed to provide sufficient information regarding accessibility features and barriers on their online reservation systems (ORS). In the past three years, Laufer has brought 63 ADA lawsuits in the Northern District of New York and 551 others across the nation (including appeals).

Judge Sannes determined that being a “tester” fails to satisfy the requirements for standing. In order to demonstrate a “concrete and particularized” past injury and likelihood of future injury, Laufer would need to establish that she “had a purpose for using the [ORS] that the complained-of ADA violations frustrated” and that she intended “to return to the [ORS] to book a room, or at least to obtain information that would allow her to decide whether to book a room.”

After Judge Sannes permitted her to amend her complaints, Laufer alleged that she intended to travel to the areas surrounding defendants’ hotels; however, the court was not convinced given the massive time and financial commitment such a travel itinerary would entail. Additionally, Laufer had not mentioned “her vague desire to travel ‘all over’ New York State and the rest of the country” until she was prodded by the court.

ACTIVIST ATTORNEY GENERAL REGULATING INDUSTRY THROUGH LITIGATION

Climate Change Legal Battle

New York City continues to be on the forefront of regulation through litigation with respect to U.S. energy policy on climate change. NYC is currently suing energy producers, alleging they should be penalized for selling oil, gas, and other energy products by paying the City’s costs for future infrastructure projects, including seawalls, to protect it from storms and rising waters. Judge John Keenan of the Southern District of New York dismissed the initial lawsuit because “the serious problems caused [by climate change] are not for the judiciary to ameliorate. Global warming and solutions thereto must be addressed by the two other branches of government.”

In 2020, the City appealed Judge Keenan’s dismissal to the U.S. Court of Appeals for the Second Circuit and asked whether the City’s state tort law claims could be so leveraged to circumvent Congress and federal agencies. The City argued that

state law applied because “there is no uniquely federal interest” in its ability to sue for local property dam- ages. The energy producers countered that federal law applied because these cases invoke federal energy and emissions policies. In April 2021, the Second Circuit affirmed the dismissal, determining that the issue of greenhouse gas emissions implicates global issues that are incompatible with the application of New York state law; therefore, federal common law applies and is displaced by the Clean Air Act.

Activist Attorney General Letitia James and her opportunistic trial lawyer friends are hellbent on holding the energy industry liable for climate change. Three weeks after the Second Circuit affirmed the dismissal, New York City, represented by Sher Edling, filed another lawsuit advancing a different theory of liability.

The City now contends that the defendants violated NYC Code § 20-700, which bars “any deceptive or unconscionable trade practices in the sale … or in the offering for sale … of any consumer goods or services,” by including in their advertisements unsubstantiated claims and implied communications that falsely convey that they are environmentally responsible energy companies. For example, the lawsuit alleges just as the tobacco industry advertised “low-tar” and “light” cigarettes, energy companies advertise their fossil fuel product as emissions reducing and environmentally beneficial without disclosing that use of their products is harmful.

This new theory of liability is part of Sher Edling’s concerted effort to profit from this litigation across the nation. The firm represents other states, including former Judicial Hellhole® Minnesota, in similar litigation.

“[T]he serious problems caused [by climate change] are not for the judiciary to ameliorate. Global warming and solutions thereto must be addressed by the two other branches of government.”
– Judge John Keenan, Senior U.S. judge for the Southern District of New York

THIRD PARTY LITIGATION FINANCING

New York City has been at the epicenter of the huge surge in litigation financing that has occurred over the past decade. This predatory business practice increases the amount of litigation and provides benefits to plaintiffs’ lawyers while preying on consumers. There have been reports of New York City third party litigation finance firms, which operate like payday lenders, encouraging vulnerable individuals to file lawsuits and then charging as high as a 124 percent interest rate.

Unlike some jurisdictions, New York does not require litigants to disclose the existence of a litigation funding agreement. Although the litigation funding agreement could potentially be discoverable if it is relevant to the case and not otherwise protected from disclosure, New York courts presented with the issue have found that the funding agreements were irrelevant and thus undiscoverable.

In 2020, the New York Court of Appeals was asked to determine whether a litigation financing agreement is usurious in certain instances. The Court had the opportunity to determine whether a specific litigation finance agreement constituted a loan or a “cover for usury.” The Ninth Circuit certified the question to the New York Court of Appeals because “the result is likely to have wide-reaching implications” and because “[o]ther states that have addressed [the issue] have reached conflicting results.” Unfortunately, the case settled in 2021 before the court had the opportunity to issue a ruling.

NUCLEAR VERDICTS

New York is experiencing a surge of “nuclear verdicts” in cases ranging from premise liability to medical malpractice. These are awards that usually include an amount for pain and suffering that dwarfs prior verdicts and, at levels in the tens of millions of dollars, hardly serve a compensatory purpose. Rather, they result from improper tactics that inflame jurors and mislead them to believe that amounts at these levels are ordinary and acceptable in litigation.

The New York Law Journal points to how the rise in nuclear verdicts is “turning the New York court system on its head” and is “contributing to the demise of New York state.”

In April 2021, the Appellate Division, First Department awarded a record-high award of $20 million in pain-and-suffering damages after plaintiffs’ lawyers used an improper tactic known as “anchoring” to achieve a staggering verdict in the lower court.

Anchoring occurs during summation, when lawyers suggest an unreasonably large award to the jury and that number becomes the starting point in a juror’s mind.

In this case, Perez v. Live Nation, plaintiffs’ lawyers asked a jury to award $85 million in noneconomic damages to a worker who fell while assembling a booth for an event at Jones Beach. Even though the plaintiff is able to live alone, drive himself, and exercise at the gym, the jury obliged with an $85.75 million pain-and-suffering award on top of $13.5 million for medical care and lost wages. The trial court lowered the noneconomic damage award to $40.6 million– an amount wildly beyond that which New York courts have per- mitted. The appellate court lowered this award to $20 million.

Unlike some other states, New York law does not set a hard cap on awards for a person’s pain and suffering, which cannot be objectively measured. Instead, in New York, a verdict is “excessive or inadequate if it deviates materially from what would be reasonable compensation.” Courts look to prior awards for comparable injuries, sustained on appeal, for guidance. Prior to the recent dramatic rise in nuclear verdicts, only two New York appellate cases surpassed $10 million in noneconomic damages and this number became known as the state’s “de facto” limit.

In July 2020, the New York Law Journal published a three-part series titled, “Ahead to the Past: The Evolution of New Rules of Engagement in the Age of Social Inflation and Nuclear Verdicts.” In this piece, the authors discuss how plaintiffs’ attorneys employ a “how dare they defend” approach to litigation. This method allows for disproportionate compensation by fueling emotional outrage. They use specific language, such as “big corporations” and “hired guns” when speaking to the jury and encourage them to “send a message” to the defendants.

Tort law is meant to compensate, not to punish. As the authors observe, “Rather than provide just compensation, [nuclear verdicts] are thinly veiled efforts to punish the defendant that are nearly always awarded at the specific request of plaintiff’s counsel.” Nuclear verdicts directly impact all New Yorkers, as they lead to higher insurance rates, higher consumer goods costs, and fewer jobs. Since public entities, such as public schools and the transit authority, are subject to these types of awards, nuclear verdicts also place taxpayers on the hook and place city services at risk.

“Rather than provide just compensation, [nuclear verdicts] are thinly veiled efforts to punish the defendant that are nearly always awarded at the specific request of plaintiff’s counsel.”
- New York Law Journal

MEDICAL LIABILITY

A 2021 report ranked New York as the third worst state for doctors, due in part to high medical malpractice awards. New York tied with Massachusetts, Pennsylvania, South Dakota, and Alaska for the highest medical malpractice award payout amounts per capita.

COVID-19 forced health systems to prioritize crucial services and reduce services that do not pro- vide proportional benefits relative to costs. Health care providers spend an estimated $46 billion per year conducting unnecessary tests and procedures to avoid medical malpractice liability. This practice, known as “defensive medicine,” drives practitioners out of rural areas due to the exorbitant cost of doing business. Data collected during the COVID-19 pandemic, during which health care providers reduced defensive medicine practices, along with prospective monitoring of the reemergence of overuse, could reveal the full societal burden of overuse.

“One little-known secret in the medical community is that it is not greedy doctors or insurance companies or hospitals that made health care so expensive. It is unnecessary tests and procedures doctors and hospitals must do in order to check off the boxes for the inevitable lawsuit. They are waiting to pounce on doctors and hospitals while wrapping themselves in the flag of ‘holding the medical establishment accountable’ and that keeps doctors and hospitals doing some things twice. And some things doctors know are unneeded but must do.” –Hank Campbell, Science 2.0 Article.

In December 2020, Chief Administrative Judge Lawrence Mark further stacked the deck against defendants with a new deposition order. The new rule limits depositions to seven hours per witness, which may adversely impact defendants by limiting their ability to collect crucial testimony from plaintiffs and essential nonparty witnesses. The complex nature of medical malpractice litigation typically necessitates multiple deposition sessions of essential witnesses to tease through years of medical care and treatment as well as information concerning chronic and preexisting conditions.

ASBESTOS LITIGATION

New York City continues to be a preferred jurisdiction for asbestos litigation ranking third for most popular with a total of 310 filings in 2020. It once again ranked second for mesothelioma case filings in 2020, totaling 130. At the date of publication, 2021 data was not yet available.

Over-Naming Defendants

A significant concern with New York City asbestos litigation is the over-naming of defendants. Because many former asbestos defendants are now bankrupt, plaintiffs indiscriminately name dozens of defendants with no proof of exposure, congesting the court system, wasting taxpayer dollars, and delaying plaintiffs’ compensation.

According to a recent study that reviewed 488 NYCAL case filings from 2015-2020, the average number of named defendants in a single case is 30-40. One case filed in 2020 named 106 defendants. Of the 540 defendants named in the sample, 249 companies were dismissed from 100% of the cases in which they were named, while over 400 companies were dismissed from more than 50%.

Personal Jurisdiction

In January 2021, the New York Court of Appeals raised the bar for defendants when asserting the affirmative defense of lack of personal jurisdiction in asbestos litigation. The Court held that defendants must unequivocally assert their defense at trial. In the case at hand, Defendant wrote in his answer, “Where applicable, Kohler preserves its right to object to personal jurisdiction of plaintiff over Kohler.” The trial court held that this defense “lacked specificity and did not fairly apprise the plaintiffs of the objection…” Applying tortured reasoning, the court stated that the defendant only preserved the right to object later and did not explicitly raise the defense. The appellate court agreed and upheld the decision without issuing an opinion.

SCAFFOLD LAW

New York City is home to some of the most expensive construction costs in the nation, thanks in no small part to its “Scaffold Law.” The Scaffold Law was enacted to “protect workers who helped build New York’s now-iconic skyline in the 19th century.” Now, it is one of the main deterrents for real estate investors and builders from investing in the city and in construction site safety. New York created a risk through legislation that is becoming uninsurable.

Under this law, courts hold contractors and property owners liable for workers’ “gravity-related injuries,” whether that injury occurred due to a fall from a stepstool or New York’s tallest tower. New York courts have found that liability under this law is “absolute,” meaning that businesses must pay up regardless of whether the fall occurred due to the workers’ carelessness or reckless conduct. No other state has such a law.

The absolute liability standard imposed by the Scaffold Law has led to a mass exodus of underwriting companies from the state, leading to higher premiums and an overall high cost of doing business. It is estimated that money wasted on the Scaffold Law could be spent to create 12,000 new jobs, boosting the state’s economy by over $150 million.

Because the Scaffold Law adds hundreds of millions of dollars to New York public projects every year, three New York-based contractor groups and the New York State Conference of Mayors and Municipal Officials have implored U.S. Transportation Secretary Pete Buttigieg to waive the Scaffold Law for contractors working on the $11.6 billion Hudson River Construction project. Additionally, the Scaffold Law is impeding affordable housing in New York State. Efforts to reform the law over the past several years consistently have fallen on deaf ears.

LIABILITY-EXPANDING LEGISLATIVE AGENDA

Despite the demonstrable need for reform, the New York Legislature pursued an aggressive liability- expanding agenda in 2021.

One of the most egregious bills passed was A.2543/ S.4730, which expands the state’s False Claims Act to cover everyday tax disputes. The bill incentivizes avaricious trial lawyers to target large tax filers to fish for miscalculations and/or compel settlements. The trial bar argues that this legislation will benefit taxpayers, increase state revenues, and reduce instances of fraud – but a closer look shows that is not the genuine intent. If they truly intended to reduce fraud, it would be far more beneficial to leave everyday tax disputes with the Tax Department rather than move them into state courts where the costs and delays of litigation likely will drive outcomes for taxpayers as much or more than the merits of a case. Moreover, under this legislation, complex tax issues will be evaluated and decided upon by judges who may have little or no tax law expertise.

If Governor Kathy Hochul signs this bill, lawyers can be expected to target deep pockets rather than the most severe violations. This will turn tax compliance into a money-making operation instead of upholding legal compliance and the taxpayers’ interests. The net effect could well be for trial attorneys to seek to review the work of every accountant in New York who advises wealthy clients in search of a disputable tax position that could result in their next payday.

Other concerning bills include:

  • Interest on Judgments for Summary Judgment (2199/ S.473)

This proposal would amend the New York State Civil Practice Law and Rules (CPLR) to mandate calculation of interest from the date of entry of the order denying summary judgment when summary judgment was subsequently granted on appeal. The calculation of pre-judgment interest would no longer be confined to contractual disputes and wrongful death actions. The legislation passed both the Senate and the Assembly.

  • Comprehensive Insurance Disclosure (8041/ S.7052)

This proposal would require a party to provide a copy of every insurance policy, contract, or agreement, as well as the extent to which the policy has eroded, other cases with potential to erode the limit, and the claims adjuster’s contact information, a virtually insurmountable task for large institutions such as hospitals, universities, and municipalities. The bill passed the Senate and the Assembly within a few hours. Tom Stebbins of the Lawsuit Reform Alliance of New York described this Midnight Rider as “quintessential Albany backroom dealing.”

This proposal would discourage innovation by permitting private class action lawsuits against entities with a “dominant position in the conduct of any business, trade, or commerce.” Although the bill was aimed at large tech companies, trial attorneys seeking a payday will target first-to-market entrepreneurs. Additionally, if this bill passes, New York will be the only state in the country to require businesses to inform a state Attorney General of mergers and acquisitions and other related transactions. The bill passed the Senate.

On November 3, 60.8% of New York voters approved Ballot Proposal 2, which expanded Article I of the New York Constitution to protect “a right to clean air and water, and a healthful environment.” This amendment will allow private attorneys to enforce this right against private landowners, businesses, and the New York State Department of Conservation (NYSDEC). Since “clean air and water” and “healthful environment” are not defined, courts will need to flesh out the scope of these terms, and even businesses operating under existing legal emissions permits could be vulnerable to litigation.

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