While Covid-19 has caused unprecedented turmoil and uncertainty throughout the world, few cities have been more ravaged by the health crisis than New York. With numerous firm clients already conducting wide-ranging commercial operations in New York City or looking to enter New York markets, it is essential to consider how Covid-19 has affected and will continue to affect dispute resolution in New York state and federal court systems.
New York courts, both state and federal, have had to make rapid decisions on how to balance the resolution of large caseloads with public health directives and recommendations. The two court systems have adopted different approaches to ongoing and new matters, which promise to impact the course of litigation in New York City for months to come.
New York State Trial Courts – Initial “PAUSE” directives
The New York state court system took a drastic approach, prohibiting paper and electronic court filings in any matters not classified as “essential”, following an Administrative Order released on 22nd March. The “essential” classification has generally excluded commercial matters, regardless of the amounts in dispute. Therefore, all non-essential Court functions are adjourned and the resolution of all commercial disputes in New York state courts have been postponed.
This Administrative Order came about on the heels of New York Governor Andrew Cuomo’s decision (outlined in Executive Order No. 202.8) to toll all applicable statutes of limitations until 19th April, undertaken along with a number of other directives to put New York on “PAUSE” (Policies Assure Uniform Safety for Everyone) during the crisis.
Governor Cuomo has since extended the statute of limitations tolling on numerous occasions. Most recently, on 7th May, he extended the tolling of the statutes of limitation until 6th June.
What will happen to the backlog of cases?
Chief Administrative Judge Marks has taken several interim steps to alleviate the substantial backlog caused by the moratorium on all non-essential matters. Through an order that became effective on 13th April, judges have been requested to make themselves available during normal court hours to determine ongoing discovery disputes and other ad hoc matters through telephonic or video conferences (the latter to be conducted via Skype Business only), which attorneys can request as needed. Judges have also received permission to resume issuing decisions on fully briefed motions and evaluate which matters before them would benefit from the scheduling of remote conferences.
On 1st May, Chief Administrative Judge Marks took another step to relieve the backlog. Since 4th May, the parties in already-pending non-essential matters have been permitted to electronically file motions and applications and respond to previously filed motions. Litigants have also received permission to file notices of appeal. Judges have received authorization to refer matters to alternative dispute resolution as appropriate.
Commercial Litigation Resumes
Nevertheless, on 20th May, trial judges were permitted to lift the ban on the commencement of new “non-essential” matters. Starting on 25th May, litigants have been able to electronically initiate new “non-essential” matters in the five New York City counties and counties surrounding New York City. Unrepresented litigants may continue to file, serve and be served papers through non-electronic means in such cases. Skype Business will remain the venue for court conferences and hearings in the five New York City counties, where courthouses have not yet reopened for commercial disputes. The future of jury trials remains unknown.
A significant surge in litigation is anticipated in the next several weeks, especially as the current crisis has created new disputes – including insurance claims, interpretations of force majeure clauses and lease defaults – that litigants have been unable to pursue in New York state courts since 22nd March. Litigants evaluating various forum options for upcoming lawsuits would be well-served to consider the possible benefits and drawbacks to their cases caused by tolled statutes of limitations and the delays due to backlogs in an already overburdened system.
New York Federal Courts – No Moratorium on Commercial Litigation
In contrast to the New York state system, federal trial courts in New York state have remained open to commercial disputes throughout the COVID-19 crisis. With no centralized directives to govern the operations of the federal court system across the country, each individual jurisdiction has issued its own set of orders and/or guidelines to progress the resolution of civil matters during this period, with many of the decisions regarding the operations of various chambers left to the discretion of individual judges. Though the courthouses have greatly curtailed in-person access, both the Southern District of New York (SDNY) – located in Manhattan – and the Eastern District of New York (EDNY) – which covers Brooklyn, Queens and Long Island – have placed no moratoriums on accepting new commercial matters or the resolution of existing matters. Neither SDNY nor EDNY have mandated telephonic or video conferences, though most judges in the districts have strongly favored such remote conferences whenever possible.
It is also significant to note that, unlike several other federal district courts throughout the country, neither SDNY nor EDNY have issued directives to toll statutes of limitations. Litigants bringing matters governed by New York state law in federal courts may be able to benefit from Governor Cuomo’s tolling of statutes of limitations, though various commentators on this topic have expressed concern about the applicability and enforceability of Executive Order No. 202.8 and its progeny in federal courts. The majority of the deadlines set forth in the Federal Rules of Civil Procedure have remained in effect, though judges in both SDNY and EDNY have been encouraged to grant adjournments and extensions liberally, as long as such requests are appropriate and do not exploit the health crisis improperly. As is the case with the New York state system, jury trials in SDNY and EDNY are continued pending further orders.
In our recent experience litigating in the EDNY, we have observed that deadlines prescribed by the Federal Rules of Civil Procedure remain intact. While no automatic stays of discovery deadlines have been imposed, reasonable requests for extensions have been granted. Communication with the judge through the ECF electronic filing system has been seamless. Nevertheless, though many aspects of litigation can be accomplished successfully without in-person interaction and attendance, we remain alert to the challenges of conducting remote depositions, a practice that is permitted and encouraged whenever possible.
We will continue to monitor directives and guidance issued by Governor Cuomo and the courts and look forward to providing additional updates on the status of litigation in New York courts as New York City slowly reopens.
The protocols and directives around litigation in New York is complex and continuously changing in light of the global pandemic. Disputing parties working with the state and federal courts located in New York City should seek professional counsel in order to successfully navigate court procedures.
Article written by: Allison Khaskelis, US Attorney and Specialist in Commercial and White Collar Litigation.