SANCTIONS FOR FAILURE TO NOTIFY COURT OF SETTLEMENT

Lesson: Don't waste the court's time.

Bank of N.Y. Mellon v Smith, 2019 NY Slip Op 06228, Decided on August 13, 2019, Appellate Division, Second Department:

"Section 1250.2(c) of the Rules of the Appellate Division, All Departments (22 NYCRR), provides, in pertinent part, that "[t]he parties or their attorneys shall immediately notify the court when there is a settlement of a matter or any issue therein or when a matter or any issue therein has been rendered moot . . . Any such notification shall be followed by an application for appropriate relief. Any party or attorney who, without good cause shown, fails to comply with the requirements of this subdivision may be subject to the imposition of sanctions."

This subdivision, by its plain language, is applicable to both "the parties" and "their attorneys" and it imposes a continuing obligation to monitor the status of the case and to apprise the Appellate Division of certain developments that might affect a pending appeal (22 NYCRR 1250.2[c]). Although, pursuant to this subdivision, only one party or attorney needs to notify the Court of the relevant developments, all of the parties and their attorneys are independently responsible for ensuring that timely notification occurs (see id. ). Where, as here, timely notification is not given by any of the parties or their attorneys, they may each be held independently responsible and, absent a showing of good cause for the failure to ensure a timely notification, sanctioned for their respective conduct (see id. ).

Here, the record demonstrates that on July 12, 2018, Gross Polowy "received confirmation" that the 2013 action had been settled as a result of a modification of the underlying mortgage. Since that same mortgage formed the basis for the 2014 action, the modification of the mortgage triggered Gross Polowy's duty to "immediately notify the court" (22 NYCRR 1250.2[c]). Indeed, by continuing to actively participate in these actions in its capacity as trial counsel during the pendency of these appeals, Gross Polowy had a continuing obligation to advise its client's appellate counsel, Day Pitney, of the settlement of the 2013 action and the modification of the mortgage. However, it is undisputed that, over the course of the next six months, Gross Polowy did not take any steps to ensure or confirm that this Court or New York Mellon's appellate counsel was notified of the settlement. Under the circumstances, Gross Polowy's excessive delay, coupled with the absence of any viable explanation for its failure to comply with 22 NYCRR 1250.2(c), warrants the imposition of sanctions in the sum of $1,000.

As indicated, New York Mellon had an independent duty to take steps to ensure that this Court was notified of the settlement that it had reached with Smith (see 22 NYCRR 1250.2[c]). There is no allegation that New York Mellon took any steps to ensure or confirm that this Court was timely notified of the settlement. The only explanation for this failure was provided by Gross Polowy during oral argument of this motion to impose sanctions, where it was argued that the attorneys it had assigned to handle the 2013 action had not communicated with the attorneys it had assigned to handle the 2014 action. Contrary to Gross Polowy's contention, the confusion stemming from New York Mellon's dubious practice of maintaining two simultaneous actions against the same party for the same relief does not constitute good cause for its failure to comply with 22 NYCRR 1250.2(c). Under the circumstances, New York Mellon's excessive delay, coupled with the absence of any viable explanation for its failure to comply with 22 NYCRR 1250.2(c), warrants the imposition of sanctions in the sum of $500.

The record establishes that Marcos & Sitaras was aware of the settlement and modification in July 2018. However, unlike Gross Polowy and New York Mellon, an attorney for Marcos & Sitaras outlines the affirmative steps he took to secure dismissal of the 2014 action after the underlying mortgage had been modified and provides an explanation as to why he was reluctant to withdraw the appeals after the settlement was reached. In this regard, he contends that New York Mellon and Gross Polowy refused to voluntarily discontinue the 2014 action and, since that action remained pending, the orders that had been appealed remained valid and enforceable. Under these circumstances, we decline to impose sanctions, in the exercise of discretion, against Smith or Marcos & Sitaras pursuant to 22 NYCRR 1250.2(c).

Finally, New York Mellon's appellate counsel, Day Pitney, represents that it first learned of the settlement from Gross Polowy on January 15, 2019. Day Pitney sets forth the steps it took to obtain the stipulation withdrawing the appeals once it was apprised of the settlement. However, notwithstanding these actions, Day Pitney did not contact this Court until February 6, 2018, approximately three weeks after it first learned of the settlement and modification of the underlying mortgage. It cannot be said that this conduct complied with Day Pitney's obligation to "immediately notify the court" when there is a relevant development (22 NYCRR 1250.2[c] [emphasis added]). As the rule itself suggests, once this Court was notified of the settlement and modification of the underlying mortgage, "an application for appropriate relief" could have been submitted on a later date (id. ).

Day Pitney further contends that, although there was a "delay" in notifying this Court of the modification of the underlying mortgage, that "delay has not prejudiced appellant or respondent." This argument fails to account for one of the primary purposes of section 1250.2(c) of the Rules of the Appellate Division, All Departments (22 NYCRR), which is to protect the Appellate Courts from spending time analyzing matters that have been rendered academic. Indeed, if this Court had been timely advised of the settlement and modification in this case, it would have been able to devote additional resources to one of the many actual controversies that fill our docket. Under the circumstances, the failure of Day Pitney to comply with 22 NYCRR 1250.2(c) warrants the imposition of sanctions in the sum of $250."